Be kind to each other – we’re all in this together just trying to find the best companies.
“This board is for the discussion and analyzing of individual high-growth companies in a cooperative and courteous manner and, secondarily, the philosophy around investing in them. (Usually high-growth currently means 40% revenue growth or more).”
I really appreciate the addition, Bear. I have been thinking along that same line as I have seen creeping in of more content that has an AI-driven flavor.
I really value reading the individual thought processes of our Board’s members.
Ok, thanks. IREN is a hard company to value, because it has no real earnings or free cash flow. It’s earnings were from a sale of a financial instrument. So I need to value it on a revenue basis. My question is, what is a reasonable p/s ratio, based on how fast revenues are growing? A company growing at 30% would have a higher p/s ratio than one growing at 5% for example.
Agreed. Seems like you can ignore the historical revenue from selling the financial instrument (nice job staying on topic!) – future revenue from the datacenter is what probably matters. They expect to have $3.4b of ARR (annual recurring revenue) by the end of 2026 (last I looked). Not sure what PS to put on that, but at their current $11.3b valuation (as far as I can tell, though shares outstanding are a moving target with this company) the fwd PS ratio is about 3.3.
3.3 seems low because we’re used to SaaS companies, but for a company that might never have high margins it’s not unreasonable. AMZN’s is around the 3 or 4 level too, but of course not growing revenue anything like IREN.
Agreed again…the key is how much IREN will be able to grow that 3.4b ARR, and how fast. Maybe they can sign some more deals and the 3.4b ARR number can double or triple or more. Pretty exciting! But since we don’t know how much they’ll grow or for how long, it’s really hard to know what a reasonable PS ratio is. And again, where margins will end up is also a question mark. In fact, I think that’s even harder to predict than revenue!
So I’m keeping my position quite small, since the range of outcomes seems pretty wide here and I just don’t have all the answers. But others are willing to take a larger position expecting lots of good news in the near future – and they may be right!