The chart below shows the following:

  • Light Blue Line: The Price to Sales ratio of the firms in the S&P500 with the fastest revenue growth
  • Dark Blue Line: The Price to Sales ratio of the firms in the S&P500 with the slowest revenue growth

The fastest growers have almost never been more expensive and conversely the slowest growers have almost never been cheaper. Most importantly, the spread between the two has almost never been wider.

Students of the markets will find value in our May 2016 white paper, “The Revenue Wreck – Are We Paying Rational Prices for an Ex-Growth America?”. Most importantly, this affinity for profitless sales growth has left profitable stocks that offer growth at reasonable prices at incredibly low valuations, creating terrific opportunities, in our view.

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