Hi everybody,

I did this analysis for my own stocks, but I figured it might interest you as well so I recalculated it for Saul’s portfolio based on his numbers from the end of may report.

I wanted to see how pricy the stocks that I own are and whether I can realistically expect a good return based on the past performance of a reference stock.

Following are the P/S ratios for Saul’s stocks plus the percentage of the stock in Saul’s portfolio:

```
TICKER PS %
ZM 86 19,80
DDOG 42 22,40
CRWD 37 21,40
OKTA 35 14,20
AYX 23 11,50
COUP 37 3,60
LVGO 25 4,00
FSLY 18 3,60
```

Using weighted average I can calculate that the **overall P/S of Saul’s portfolio** is 45.

So is this a sensible price for these companies?

For comparison, let’s take AMZN 14 years ago, when it was a $15B company: If you bought AMZN at price to book ratio of 45 back in 2006, you’d be paying around $1200. If you did that, you could sell it for double today, netting you 3,5% yearly gain on your investment. That’s not very encouraging, but maybe it’s not quite fair to compare AMZN with Saul’s portfolio - let’s look at how the companies differ in growth and margins

**AMZN vs Saul growth**:

AMZN reported YoY revenue growth of 40% from 2006 to 2007.

Here’s what Saul’s companies are guiding for:

```
TICKER Revenue YoY Growth Guidance
ZM 46%
DDOG 52%
CRWD 51%
OKTA 32%
AYX 34%
COUP 45%
LVGO 74%
FSLY 43%
```

Now here it’s a bit more difficult to calculate overall guided growth for Saul’s portfolio, because that’s weighted both by the percentage of portfolio and by the size of the company, don’t have the time to get all the data, so I’ll eye-ball it to 45%.

45% guided Saul growth is not that much higher than the 40% AMZN recorded in 2007.

**Saul’s portfolion vs AMZN margins:**

I would argue, that Saul’s companies are fundamentally different than AMZN in 2006 - they don’t have the same kind of costs that a physical goods distribution comes with. So let’s look at the margins.

AMZN had a gross margin of 22% back in 2006.

Here’s the gross margins of Saul’s stocks:

```
TICKER GM
ZM 80%
DDOG 77%
CRWD 73%
OKTA 74%
AYX 88%
COUP 64%
LVGO 74%
FSLY 58%
Overall the Saul's stock portfolio gross margin is around 77%, that's 3,5 times higher than AMZN
```

**Putting it together**

If I try to put it all together:

- If you bought AMZN for $1200 back in 2006 you’d get 100% return in 14 years
- If AMZN grew by 45% instead of 40%, you’d get 112% return
- If AMZN had 3,5 times higher margins, you’d get to around 400% return. Or 11% annually.

**So based on AMZN’s past stock performance adjusted by growth and margins, you can expect 11% returns at the current prices of Saul’s portfolio**

Please share your thoughts on this.