I’m putting on my dunce cap here and asking for advice on ZS. I am aware this may come off as sour grapes, as I don’t own it. However, I am really struggling to understand. Their PS ratio is otherworldly…the only time I’ve seen anything like it is with the post-IPO hype for SNAP…when it was trading over $20/share. It’s at under $12/share now.
How high is ZScaler’s PS ratio? It is currently at 33. That’s astounding. Even when Shopify was growing revenue at 100% or close to it, their PS ratio never got over 22 or 23…and I thought that was the highest I’d ever see. Zscaler’s revenue grew 49% last quarter.
They’re not yet profitable, but if they had a net margin of 30%, their PE ratio would be 110. That’s if they had a net margin of 30%! …which would be enviable by even most mature companies.
Also the lockup expiration is 9/12…never know what will happen there, but you have to think some might want to take their money and run.
Let’s take as a given that they are the best company in the cloud security market. I don’t want to bring that into question at all. I’m purely asking about the numbers. And I guess my question is, what is the market seeing that I’m not? Are they going to start growing at near 100% or faster and then do so for years? Because short of that, this valuation makes no sense to me. Simply because there are other stocks to be had for a lot less of a premium.