Multiple Expansion: A Tale of Two Markets
- The NAVY BLUE BARS show the price-to-sales ratio of stocks in 2010 by decile, from least to most expensive
- The LIGHT BLUE BARS show the price-to-sales ratio of stocks TODAY by decile, from least to most expensive
- While stocks are generally more expensive today than in 2010, the market’s most expensive stocks trade at a staggering 32x revenues today – a 400% increase from where they were in 2010
- Consistent with common-sense and as documented in our papers “From Brilliant to Brain Dead” and “IPO Stocks are the New Staples”, paying 32x sales for a company is a highly speculative endeavor
- For investors looking for high quality firms trading at reasonable prices that offer healthy income, see our recent papers on high quality midcaps and consumer staples
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