Making sense of tech sector valuations

The Aging Of The Tech Sector: The Pricing Divergence Of Young And Old Tech Companies

Another gem from Damodaran. He slices up the tech sector based on company age and makes several interesting observations:

  • Young tech companies are not necessarily overvalued relative to young companies in other sectors, though they tend to show earnings later.

  • Analysts expect old tech (>35 years) to grow much faster than old companies in other sectors, but the reality has been the other way around.

  • The tech sector in general carries much less debt than the broad market.

  • Many companies that operate in markets outside of technology are often misnamed as tech companies because their product is software or technology based.

Worth a read.