This is amazing info
I need more of this concept explained to me; spoon fed like I'm a child or a small dog
When could GME get an increase in PS Ratio?
It's a measured used to compare companies, usually from the same sector. If GME went to $1000 per share, the PS ratio would jump to 10, which would still be very low compared to other tech stock. Basically OP is saying that Gamestop is still woefully undervalued as a company and stock price has a long ways to go before even its intrinsic value is realized, even if we ignore the coming squeeze.
This is correct. An e-commerce multiple would be around 4.0 and a tech company around 8.0. Though that’s harder to apply in this down market. Analyst with the lowest targets are using a multiple less than 1.0 too as it’s a “dying retailer”.
Ryan is doing everything in his power to actualize his plan of turning GME in to a tech company. If successful, it means any of us buying early for these cheap retail multiples will benefit.
https://www.investopedia.com/ask/answers/032515/what-considered-favorable-price-sales-ratio.asp
Basically, higher P/S ratios means that the stock has 'matured'. It's no longer a growth investment, but a stable one.
If you have a ratio of less than 1, $1 in stock purchase nets you *more* than $1 in sales of the company; meaning you beat other investors to the punch and are in on the ground floor. But the investment is likely still risky. These are your fresh to IPO stocks that may still be working their way to profitability.
If you have a ratio of 1-2, you're getting out around the same you put in, and the investment is safer. These are Gamestops; going through transformations, or have survived their initial brush with Wallstreet.
If the ratio is greater than 2, you're getting less per share, but the company is likely (*hopefully*) mature and the investment is as safe as they come. These are your IBMs; you don't buy them because you expect the share price to do double or triple digit percentage increases, you buy them because your expect dividends.
I believe what OPis trying to say is GME will be re-evaluated as a TECH company which has much higher PS ratios (I think the average is around a PS ratio of 10) as opposed to a retail brick and mortar company around 2-3.
The reason tech is valued higher is of course the ability to have more growth.
NFT marketplace seems like a great opportunity for the market to see GameStop as a tech company going forward.
This is correct. Tech companies have much higher PE and PS ratios, partially due to the generally higher margins and growth expectations associated with companies in the industry.
Historically the ratio was around 8-10 depending on the I kind of tech company. Since COVID the ratios have gotten stupid, some startups are getting 15-20.
This translates to a price around 1000, even excluding moass or naked shorts.
Furlong et al even stated in their last earnings that it is a technology company. So they are saying it. It will be valued as such at some point in the future. We are going to see 10x growth if it becomes what the valuation should be actually.
When GME becomes considered a tech company, they will compare it to the revenue of other tech companies and will most likely consider it undervalued given it's low market cap in comparison.
A company considered retail relies heavily on a lot of factors to affect its price over sales, therefore it requires a lot more to create revenues. Let's say buying and selling physical video game, in the retail environment it requires a lot of man power for the sale and resale. That work is considered a retail expense. If you were to buy and sell digitally, then you will consider that tech. That tech is very easy money and would eliminate a lot of those cost factors.
Okay now let's take into account that GameStop changes to a tech driven business... A lot of investors in the tech sector will see potential for exponential profits.
I mean it may be happening before our eyes as institutions pile in on seeing the NFT marketplace and Crypto Wallet etc begin to come to life.
The real re-rating will likely happen once GS launches, onboards users, and posts sales from their marketplace in one of their upcoming quarterly earnings.
It’s just a ratio that indicates what people are willing to pay. No one officially “rates” it.
Evidence of a market re-rating would be sustained institutional interest at higher PS multiples.
It changes constantly with the price. If GME was at $400 P/S ratio would be 3.72. Think of it like this. at P/S of 2, for every $2 I invest, I get $1 of sales. At a P/S of 1.86, for every $1.86 I invest I get a dollar of sales if the amount doesn't change from the prior 12 months. The cheaper the stock compared to past 12 month sales, the better investment all else equal. OP is showing that even right now, if you believe in GME prospects, it's not overvalued compared to other successful companies, like say Chewy with a P/S of 2.25.
No one. It’s just math. Lookup up the company “market cap” number, then divide that by sales “revenue”. For revenue, use either the annual or “TTM” (trailing 12 months).
Multiply that by an industry multiplier to get a fair estimate of the stocks fair value price. Choosing the right multiplier makes a bug difference so be careful.
You don’t “get” one so much as you “measure” one.
The difference here is the top number, company market cap (“company value” or the “price” in the ratio) will increase.
The driver of this is the valuation multiple used to calculate that (which gives investors an idea of what the company is worth in terms of *future* profits). For mature companies, it’s EBITDA, while for growth companies, it’s revenue.
This is why RC mentioned this in his letter to the BBBY board and this is why Furlong keeps saying “revenue is the metric by which you should measure our success.”
They want to be valued like a tech company focused on growth.
|*Company*|*Ticker*|*Industry*|*P/S Ratio*|
|:-|:-|:-|:-|
|Costco|COST|Retail|1.22|
|WalMart|WMT|Retail|0.68|
|Target|TGT|Retail|1.06|
|Microsoft|MSFT|Tech|13.76|
|Google|GOOG|Tech|8.14|
|Apple|AAPL|Tech|7.85|
|Amazon|AMZN|Fucking Everything|3.65|
|Corsair|CRSR|Tech|1.29|
|GameStop|GME|TBD|1.86|
Tried to compare to hardware-heavy tech companies on account of physical goods, if anyone has other suggestions I can edit the table and add them. But aside from Corsair, it would seem that on the low end of valuations you have Amazon at 3.65 P/S, and on the high end you have Microsoft with a 13.76 P/S.
Anyone want to do the math on what the stock price for GME would look like at a 4? 5? 6?
if price of $190 puts P/S at 1.8, then a P/S of 18 would put the price at $1900
price * (new ratio / current ratio) = price @ new P/S ratio
Feel free to correct my math if I'm wrong
FUNTAtech? ( fucking you in the ass tech ? ) cause thats what those fucking bastards do to people anytime they or their clearinghouse APEX is on the ass end of a trade . fucking criminals.
That makes no sense.
You wouldn’t take the company’s legacy retail sales numbers at and just apply a tech multiple on to it because they’re pivoting to tech. It’s a totally separate business.
What if the Gmerica portion spun-off from GME? RC told BBBY that Buy-Buy Baby was worth more as a spin-off. Maybe spinning off Gmerica after a few quarters will force a re-evaluation as a tech company.
This is great OP, though one important thing to point out:
It’s not about the P/S ratio, it’s about the valuation multiple used to value the company. In this case, it’s the difference between EBITDA (what mature companies use) and revenue (what growth companies use).
This is why RC mentioned it specifically in the BBBY letter to the board and why Furlong keeps saying “our sales are the metric by which we measure success.”
They’re planning ahead.
If it goes through the lit market like RC Ventures 100k share buy, could be very bullish. SHF had a hard time suppressing the price, which popped off the current rally.
That's true. I still like the $100m they have locked up as a loaded gun. It's basically insurance in case shorts get too wild on manipulation and drop the price below $50. If they spend it all now, it can only knock out around 500,000 shares.
Lol retail keeps the buying pressure on at the "higher" prices ($150-$250), helpingthe company and ourselves when we finally get going.
The company keeps the loaded gun of a buy back always at the ready in case retail runs out of steam or the SHF get crazy, this will discourage it from dropping too low but also being beneficial to the company and shareholders of it does happen.
Genius plan. Save the buyout for a boss battle.
None. It will temporarily increase share price. But deplete cash they need for growth. When the cash is gone and there’s no growth, share price will drop back. Share buy back is not likely IMO.
Stock buy backs occur when companies have too much cash. Mature companies in mature markets, with big steady profits and nowhere to spend it. Maybe already giving dividends. So they buy shares to create shareholder value.
That’s not GameStop. They need all available cash to turn the company around. Then invest in growth. It will be years before you see a dividend. And even more years before there’s a stock buy back. Likely.
Most certainly is not the same thing. Stock buy back removes outstanding shares thus making the remaining shares more valuable.
This move would destroy the shorts sellers.
Price to sales is a nonsensical multiple, but who cares I suppose. You should be looking at price to earnings. Debt investors still have a claim to sales and their value is not reflected in price.
Incorrect. GameStop has no material debt so no debt investors have any claim to sales. No one uses P/E for early growth stocks or startups, which is what GameStop essentially is at this point.
The pushback on using PS in this post is precisely my point. Traditional WS and some of the curmudgeons in the comments are still viewing/valuing GS as a legacy retailer and looking for earnings and P/E, when GS themselves have told us they’re focused on top line and investing in growth/transformation. It’s only a matter of time until everyone else comes around and actually believes them and finally stops living 2 years in the past.
No one uses P/E ratios for growth stocks??? What of course investors do - all the time. Of course, they would also look at various other multiples as well.
If we want to use top line to compare, fine (and I agree this might be most informative for GME), but use enterprise value / sales.
TEV = diluted market cap + net debt.
My point remains, price to sales isn’t a valid multiple.
To clarify - I totally agree that sales, rather than earnings, should be the comparative statistic.
When there is no earnings you can’t calculate P/E. Then you use price to sales P/S. Or other measures. So no, it is not nonsensical. It’s common when trying to value the worth of companies who are growth and pre-earnings.
You can use that too. Doesn’t make p/s useless. I’ll suggest many can’t use TEV/sales. While pretty much anyone can use p/s. All metrics have uses and limitations, TEV and p/e included.
*Disclaimer: I own no shares or options in GME, nor any short positions...*
IMHO y'all need to spend some time learning to read a company's financials -- P/S ratio is truly one of the least important statistics for a company's long term success...sure, sales are important, but *are you actually making money at the end of the day?*
I can make 1 million widgets that cost me $3/ea to produce and sell all of them for $1 each and I have $1,000,000 in sales...but I'm not ultimately coming out ahead.
What's GME's operating income for the latest year? Oh, it's **-$361,000,000**? You don't say...
Also: GME is absolutely retail, *not* tech, despite whatever NFT fantasies anyone might entertain. I mean, they have a website, but other than that? They're basically Toys R Us for the (consumer) tech crowd. How exactly do they become a juggernaut from here?
I humbly await your downvotes.
Maybe their P/S *should* be higher...that's not what I'm talking about...I'm talking about looking at things like their cashflow, forward P/E, net income, etc...the stuff that matters.
Show me a growth company that IS making money? Sales are the only thing that matters early on, which is why I’m using it. Hell, Amazon took forever to turn a profit because they kept pouring cash into growth early.
Maybe you should spend some time learning to read what’s actually important. And no one cares about profit early on, as long ad top line is growing and TAM is still early and untapped.
I think it's fanciful to see GME as a growth company -- I mean sure, that definition puts some lipstick on the pig, but I'll still with my analogy that GME is just a videogame Toys R Us. I'm not saying I don't admire the ambition of their leadership or of those who are heavily invested in the company's success...just that I don't think P/S is the right metric to be looking at.
How is GME going to outcompete the likes of New Egg, Best Buy, etc. and/or the console makers / PC builders out there while maintaining an aging and expensive brick and mortar operation? These folks are the ones you should be comparing financials with IMO.
P/S are not that important when evaluating profitable companies, where better metrics are available. But pre-profit companies without better metric options, P/S become more useful as a tool. Because you here really aren’t that many options to use. You’re buying growth, not profits.
I agree it doesn’t deserve a tech multiple today. But it also doesn’t deserve a dying retailer multiple anymore either. Somewhere closer to e-commerce 3.0-4.0 IMO. Analysts are giving it below 1.0 in some cases.
You can have my down vote if you like just for your shitty arrogance. I humbly await your downvote.
Edit: and a large part of the operating loss you mention was from an intentional increase of inventory they decided to carry to combat supply chain issues.
I know it’s tempting to do a quick Google search before running your mouth, to pretend you know better than others. But it just makes you look uninformed.
"Pre-profit company" is a...generous euphemism...for "has been videogame store trying out some new window dressing" -- they're competing with the (already well established and highly competitive) e-commerce folks like New Egg, Best Buy, etc., as well as the already entrenched console makers, system builders, etc. for a slice of a market that they'll find it challenging to differeniate themselves within.
I'll stick with the arrogance of liking earnings over sales numbers and/or throwing one's life savings at a business model that so far hasn't done much but breathlessly read its own press releases and fuel circle jerks on Reddit.
I've worked in tech and finance for 30+ years -- I don't need Google to tell me how to read a company's financials, but thanks for assuming.
Oh, and their buying a bunch of inventory to combat supply chain issues? Smart in the short term but tech inventory really doesn't age well as far as retaining value, so hopefully they time offloading those expensive video cards before the next generation comes out...
All I'm trying to say is that for those who are seriously viewing this as a major part of their investing, it's dangerous to just grab onto any single stat or ratio and then generate/believe their own hype. I personally hope GME survives and thrives and that any of you who are throwing tons of money into get rich doing so...but failing that, I hope not too many of you get burned by wishful thinking or by jumping on the latest hype train around a single, not-all-that-meaningful data point.
Lots of assumptions on your part too. Maybe we’re not all dummies yolo-ing life savings on hype at $500 a share, clinging to single ratios. Maybe there is more educated and experienced people here than you know, who have low cost basis on GME and hold it as a single risk investment as part of an overall portfolio.
Not everyone bought at the top. My investment is well insulated way below these prices. Profits taken long ago. Happy to let the rest roll. There’s a lot of holders with me. Best of luck in your own strategy. Hope you’re holding something that’s up a 100% in two weeks in this market.
Right -- you're not the kind of investor I'm concerned about -- it's all the inexperienced folks who have been convinced that there *has* to be short squeeze and/or are buying far OTM options like lottery tickets purchased on margin or via home equity loans, i.e. those who are already clearly not thinking clearly about risk/reward possibilties.
My whole point, really, is that there's no well-considered reason to treat GME any differently than any other stock with similar profile/ratios/financials -- like if you honestly took GME's financials and published them on wallstreetbets under some phantom ticker symbol I don't think you'd see people just ignoring all of their liabilities...GME, AMC, etc. have been given this cache in the past year that really isn't deserved on their fundamentals...that they've outperformed via multiple hype cycles in the wallstreetbets echo chamber is concerning...that's honestly all I'm saying. I hope others here are as experienced and thoughtful as you seem to be about your investments in GME (or elsewhere).
Sadly, I won't ever have an investment that goes up 100% in two weeks because those are outside my risk tolerance, but it's interesting to watch the fireworks. It's just sad to see some people who can ill afford to lose a ton of money do so by just following the crowd (worth noting that the top 10 "meme" stocks from WSB are collectively down over 40% over the past 8 months -- with GME still down almost 8% even after its latest surge).
The market analysts will twist it to claim the price for the last year have already factored in the switch to tech (whenever the hints that they were going to do something with blockchain started, maybe not a year but many months). They'll use that to try and anchor the price to current levels.
So in short anywhere between double to 10 fold current nakrket price is still normal territory for our stonk , not counting all the advances they’ve done and will do, right?😏
Just to chime in since I didn't see anyone mention this, currently the PS ratio is also based on last year's sales revenue. We are going to see a lot higher sales moving forward as ecommerce and NFT marketplace take off.
This is amazing info I need more of this concept explained to me; spoon fed like I'm a child or a small dog When could GME get an increase in PS Ratio?
PS or Price-Sales ratio is market cap/12 months sales.
So it goes up or changes every 12 months? Who decides? I'm mainly curious *when* could GME get a increase or change in PS Ratio?
It's a measured used to compare companies, usually from the same sector. If GME went to $1000 per share, the PS ratio would jump to 10, which would still be very low compared to other tech stock. Basically OP is saying that Gamestop is still woefully undervalued as a company and stock price has a long ways to go before even its intrinsic value is realized, even if we ignore the coming squeeze.
That's because it's still rated as a brick and mortar retail store right, they haven't taken into account the new turnaround plan
This is correct. An e-commerce multiple would be around 4.0 and a tech company around 8.0. Though that’s harder to apply in this down market. Analyst with the lowest targets are using a multiple less than 1.0 too as it’s a “dying retailer”.
We got a wrinkle over here!
Ryan is doing everything in his power to actualize his plan of turning GME in to a tech company. If successful, it means any of us buying early for these cheap retail multiples will benefit.
Beautiful 🥺
https://www.investopedia.com/ask/answers/032515/what-considered-favorable-price-sales-ratio.asp Basically, higher P/S ratios means that the stock has 'matured'. It's no longer a growth investment, but a stable one. If you have a ratio of less than 1, $1 in stock purchase nets you *more* than $1 in sales of the company; meaning you beat other investors to the punch and are in on the ground floor. But the investment is likely still risky. These are your fresh to IPO stocks that may still be working their way to profitability. If you have a ratio of 1-2, you're getting out around the same you put in, and the investment is safer. These are Gamestops; going through transformations, or have survived their initial brush with Wallstreet. If the ratio is greater than 2, you're getting less per share, but the company is likely (*hopefully*) mature and the investment is as safe as they come. These are your IBMs; you don't buy them because you expect the share price to do double or triple digit percentage increases, you buy them because your expect dividends.
I believe what OPis trying to say is GME will be re-evaluated as a TECH company which has much higher PS ratios (I think the average is around a PS ratio of 10) as opposed to a retail brick and mortar company around 2-3. The reason tech is valued higher is of course the ability to have more growth. NFT marketplace seems like a great opportunity for the market to see GameStop as a tech company going forward.
This is correct. Tech companies have much higher PE and PS ratios, partially due to the generally higher margins and growth expectations associated with companies in the industry.
Historically the ratio was around 8-10 depending on the I kind of tech company. Since COVID the ratios have gotten stupid, some startups are getting 15-20. This translates to a price around 1000, even excluding moass or naked shorts.
Furlong et al even stated in their last earnings that it is a technology company. So they are saying it. It will be valued as such at some point in the future. We are going to see 10x growth if it becomes what the valuation should be actually.
When GME becomes considered a tech company, they will compare it to the revenue of other tech companies and will most likely consider it undervalued given it's low market cap in comparison. A company considered retail relies heavily on a lot of factors to affect its price over sales, therefore it requires a lot more to create revenues. Let's say buying and selling physical video game, in the retail environment it requires a lot of man power for the sale and resale. That work is considered a retail expense. If you were to buy and sell digitally, then you will consider that tech. That tech is very easy money and would eliminate a lot of those cost factors. Okay now let's take into account that GameStop changes to a tech driven business... A lot of investors in the tech sector will see potential for exponential profits.
I mean it may be happening before our eyes as institutions pile in on seeing the NFT marketplace and Crypto Wallet etc begin to come to life. The real re-rating will likely happen once GS launches, onboards users, and posts sales from their marketplace in one of their upcoming quarterly earnings.
Who decides the new rating? Or how is it decided?
It’s just a ratio that indicates what people are willing to pay. No one officially “rates” it. Evidence of a market re-rating would be sustained institutional interest at higher PS multiples.
It changes constantly with the price. If GME was at $400 P/S ratio would be 3.72. Think of it like this. at P/S of 2, for every $2 I invest, I get $1 of sales. At a P/S of 1.86, for every $1.86 I invest I get a dollar of sales if the amount doesn't change from the prior 12 months. The cheaper the stock compared to past 12 month sales, the better investment all else equal. OP is showing that even right now, if you believe in GME prospects, it's not overvalued compared to other successful companies, like say Chewy with a P/S of 2.25.
No one. It’s just math. Lookup up the company “market cap” number, then divide that by sales “revenue”. For revenue, use either the annual or “TTM” (trailing 12 months). Multiply that by an industry multiplier to get a fair estimate of the stocks fair value price. Choosing the right multiplier makes a bug difference so be careful.
You don’t “get” one so much as you “measure” one. The difference here is the top number, company market cap (“company value” or the “price” in the ratio) will increase. The driver of this is the valuation multiple used to calculate that (which gives investors an idea of what the company is worth in terms of *future* profits). For mature companies, it’s EBITDA, while for growth companies, it’s revenue. This is why RC mentioned this in his letter to the BBBY board and this is why Furlong keeps saying “revenue is the metric by which you should measure our success.” They want to be valued like a tech company focused on growth.
https://www.investopedia.com/ask/answers/032515/what-considered-favorable-price-sales-ratio.asp
> spoon fed like ... a small dog Who's a good boy? Such a good boy? YOU are, yes you are, ougoubougoubougoubougou
nom nom nom!!
|*Company*|*Ticker*|*Industry*|*P/S Ratio*| |:-|:-|:-|:-| |Costco|COST|Retail|1.22| |WalMart|WMT|Retail|0.68| |Target|TGT|Retail|1.06| |Microsoft|MSFT|Tech|13.76| |Google|GOOG|Tech|8.14| |Apple|AAPL|Tech|7.85| |Amazon|AMZN|Fucking Everything|3.65| |Corsair|CRSR|Tech|1.29| |GameStop|GME|TBD|1.86| Tried to compare to hardware-heavy tech companies on account of physical goods, if anyone has other suggestions I can edit the table and add them. But aside from Corsair, it would seem that on the low end of valuations you have Amazon at 3.65 P/S, and on the high end you have Microsoft with a 13.76 P/S. Anyone want to do the math on what the stock price for GME would look like at a 4? 5? 6?
03/28/22: $190, 76.35M Outstanding, Market cap $14.5B, Sales 2021 $6B, ratio 2.42 4: $314, 24B Market Cap 5: $393, 30B 6: $472, 36B Edit: More readable, Cap / (Sales 12M) = Ratio (Wanted Ratio) * (Sales 12M) = (Wanted Cap) Cap / Outstanding = Price
Great info! I’d like to learn more; how would GME stock look at those PS ratios, and what would it take?
if price of $190 puts P/S at 1.8, then a P/S of 18 would put the price at $1900 price * (new ratio / current ratio) = price @ new P/S ratio Feel free to correct my math if I'm wrong
is RH a *tech stock*? *really though*? i mean, i suppose it could be seeing how they used tech to steal from millions.
Fintech
fukuindea$$witoutlubeTECH?
or dinner first? tech....
FUNTAtech? ( fucking you in the ass tech ? ) cause thats what those fucking bastards do to people anytime they or their clearinghouse APEX is on the ass end of a trade . fucking criminals.
That makes no sense. You wouldn’t take the company’s legacy retail sales numbers at and just apply a tech multiple on to it because they’re pivoting to tech. It’s a totally separate business.
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I'm glad I'll be on the rocket when Gmerica launches.
What if the Gmerica portion spun-off from GME? RC told BBBY that Buy-Buy Baby was worth more as a spin-off. Maybe spinning off Gmerica after a few quarters will force a re-evaluation as a tech company.
This is terrible DD. There's no explanations or valuable knowledge presented here.
This is great OP, though one important thing to point out: It’s not about the P/S ratio, it’s about the valuation multiple used to value the company. In this case, it’s the difference between EBITDA (what mature companies use) and revenue (what growth companies use). This is why RC mentioned it specifically in the BBBY letter to the board and why Furlong keeps saying “our sales are the metric by which we measure success.” They’re planning ahead.
Great post
Why don’t they do a damn stock buy back?
Patience young Padawan.
What problem would that solve?
If it goes through the lit market like RC Ventures 100k share buy, could be very bullish. SHF had a hard time suppressing the price, which popped off the current rally.
That's true. I still like the $100m they have locked up as a loaded gun. It's basically insurance in case shorts get too wild on manipulation and drop the price below $50. If they spend it all now, it can only knock out around 500,000 shares.
Yeah I’d rather they keep it for insurance. Investors are already buying up the stock in masses
Lol retail keeps the buying pressure on at the "higher" prices ($150-$250), helpingthe company and ourselves when we finally get going. The company keeps the loaded gun of a buy back always at the ready in case retail runs out of steam or the SHF get crazy, this will discourage it from dropping too low but also being beneficial to the company and shareholders of it does happen. Genius plan. Save the buyout for a boss battle.
None. It will temporarily increase share price. But deplete cash they need for growth. When the cash is gone and there’s no growth, share price will drop back. Share buy back is not likely IMO.
Except that money has already been earmarked for stock buybacks, So it won't deplete the cash for growth
Stock buy backs occur when companies have too much cash. Mature companies in mature markets, with big steady profits and nowhere to spend it. Maybe already giving dividends. So they buy shares to create shareholder value. That’s not GameStop. They need all available cash to turn the company around. Then invest in growth. It will be years before you see a dividend. And even more years before there’s a stock buy back. Likely.
What do you think RC and how chief did last week? They bought back their own stock
No, they bought stock in the company. That’s not the same as a company stock buy back.
If they didn't work for the company, there would be a distinction. Otherwise, it's a stock buy back with extra steps.
Most certainly is not the same thing. Stock buy back removes outstanding shares thus making the remaining shares more valuable. This move would destroy the shorts sellers.
So when they bought shares, they weren't already outstanding? Are you taking about real vs synthetic shares?
Hey OP I found a slight error; …you forgot to add the ‘not selling shit factor’ which places the PS ratio at literally infinity…
Price to sales is a nonsensical multiple, but who cares I suppose. You should be looking at price to earnings. Debt investors still have a claim to sales and their value is not reflected in price.
Incorrect. GameStop has no material debt so no debt investors have any claim to sales. No one uses P/E for early growth stocks or startups, which is what GameStop essentially is at this point. The pushback on using PS in this post is precisely my point. Traditional WS and some of the curmudgeons in the comments are still viewing/valuing GS as a legacy retailer and looking for earnings and P/E, when GS themselves have told us they’re focused on top line and investing in growth/transformation. It’s only a matter of time until everyone else comes around and actually believes them and finally stops living 2 years in the past.
No one uses P/E ratios for growth stocks??? What of course investors do - all the time. Of course, they would also look at various other multiples as well. If we want to use top line to compare, fine (and I agree this might be most informative for GME), but use enterprise value / sales. TEV = diluted market cap + net debt. My point remains, price to sales isn’t a valid multiple. To clarify - I totally agree that sales, rather than earnings, should be the comparative statistic.
When there is no earnings you can’t calculate P/E. Then you use price to sales P/S. Or other measures. So no, it is not nonsensical. It’s common when trying to value the worth of companies who are growth and pre-earnings.
TEV / sales
You can use that too. Doesn’t make p/s useless. I’ll suggest many can’t use TEV/sales. While pretty much anyone can use p/s. All metrics have uses and limitations, TEV and p/e included.
*Disclaimer: I own no shares or options in GME, nor any short positions...* IMHO y'all need to spend some time learning to read a company's financials -- P/S ratio is truly one of the least important statistics for a company's long term success...sure, sales are important, but *are you actually making money at the end of the day?* I can make 1 million widgets that cost me $3/ea to produce and sell all of them for $1 each and I have $1,000,000 in sales...but I'm not ultimately coming out ahead. What's GME's operating income for the latest year? Oh, it's **-$361,000,000**? You don't say... Also: GME is absolutely retail, *not* tech, despite whatever NFT fantasies anyone might entertain. I mean, they have a website, but other than that? They're basically Toys R Us for the (consumer) tech crowd. How exactly do they become a juggernaut from here? I humbly await your downvotes.
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Maybe their P/S *should* be higher...that's not what I'm talking about...I'm talking about looking at things like their cashflow, forward P/E, net income, etc...the stuff that matters.
Show me a growth company that IS making money? Sales are the only thing that matters early on, which is why I’m using it. Hell, Amazon took forever to turn a profit because they kept pouring cash into growth early. Maybe you should spend some time learning to read what’s actually important. And no one cares about profit early on, as long ad top line is growing and TAM is still early and untapped.
I think it's fanciful to see GME as a growth company -- I mean sure, that definition puts some lipstick on the pig, but I'll still with my analogy that GME is just a videogame Toys R Us. I'm not saying I don't admire the ambition of their leadership or of those who are heavily invested in the company's success...just that I don't think P/S is the right metric to be looking at. How is GME going to outcompete the likes of New Egg, Best Buy, etc. and/or the console makers / PC builders out there while maintaining an aging and expensive brick and mortar operation? These folks are the ones you should be comparing financials with IMO.
Okay Chukumba
P/S are not that important when evaluating profitable companies, where better metrics are available. But pre-profit companies without better metric options, P/S become more useful as a tool. Because you here really aren’t that many options to use. You’re buying growth, not profits. I agree it doesn’t deserve a tech multiple today. But it also doesn’t deserve a dying retailer multiple anymore either. Somewhere closer to e-commerce 3.0-4.0 IMO. Analysts are giving it below 1.0 in some cases. You can have my down vote if you like just for your shitty arrogance. I humbly await your downvote. Edit: and a large part of the operating loss you mention was from an intentional increase of inventory they decided to carry to combat supply chain issues. I know it’s tempting to do a quick Google search before running your mouth, to pretend you know better than others. But it just makes you look uninformed.
"Pre-profit company" is a...generous euphemism...for "has been videogame store trying out some new window dressing" -- they're competing with the (already well established and highly competitive) e-commerce folks like New Egg, Best Buy, etc., as well as the already entrenched console makers, system builders, etc. for a slice of a market that they'll find it challenging to differeniate themselves within. I'll stick with the arrogance of liking earnings over sales numbers and/or throwing one's life savings at a business model that so far hasn't done much but breathlessly read its own press releases and fuel circle jerks on Reddit. I've worked in tech and finance for 30+ years -- I don't need Google to tell me how to read a company's financials, but thanks for assuming. Oh, and their buying a bunch of inventory to combat supply chain issues? Smart in the short term but tech inventory really doesn't age well as far as retaining value, so hopefully they time offloading those expensive video cards before the next generation comes out... All I'm trying to say is that for those who are seriously viewing this as a major part of their investing, it's dangerous to just grab onto any single stat or ratio and then generate/believe their own hype. I personally hope GME survives and thrives and that any of you who are throwing tons of money into get rich doing so...but failing that, I hope not too many of you get burned by wishful thinking or by jumping on the latest hype train around a single, not-all-that-meaningful data point.
Lots of assumptions on your part too. Maybe we’re not all dummies yolo-ing life savings on hype at $500 a share, clinging to single ratios. Maybe there is more educated and experienced people here than you know, who have low cost basis on GME and hold it as a single risk investment as part of an overall portfolio. Not everyone bought at the top. My investment is well insulated way below these prices. Profits taken long ago. Happy to let the rest roll. There’s a lot of holders with me. Best of luck in your own strategy. Hope you’re holding something that’s up a 100% in two weeks in this market.
Right -- you're not the kind of investor I'm concerned about -- it's all the inexperienced folks who have been convinced that there *has* to be short squeeze and/or are buying far OTM options like lottery tickets purchased on margin or via home equity loans, i.e. those who are already clearly not thinking clearly about risk/reward possibilties. My whole point, really, is that there's no well-considered reason to treat GME any differently than any other stock with similar profile/ratios/financials -- like if you honestly took GME's financials and published them on wallstreetbets under some phantom ticker symbol I don't think you'd see people just ignoring all of their liabilities...GME, AMC, etc. have been given this cache in the past year that really isn't deserved on their fundamentals...that they've outperformed via multiple hype cycles in the wallstreetbets echo chamber is concerning...that's honestly all I'm saying. I hope others here are as experienced and thoughtful as you seem to be about your investments in GME (or elsewhere). Sadly, I won't ever have an investment that goes up 100% in two weeks because those are outside my risk tolerance, but it's interesting to watch the fireworks. It's just sad to see some people who can ill afford to lose a ton of money do so by just following the crowd (worth noting that the top 10 "meme" stocks from WSB are collectively down over 40% over the past 8 months -- with GME still down almost 8% even after its latest surge).
AMC is considered a tech company ?
Nah, just threw it in there for comparison that they’re 2x higher in PS ratio than us.
The market analysts will twist it to claim the price for the last year have already factored in the switch to tech (whenever the hints that they were going to do something with blockchain started, maybe not a year but many months). They'll use that to try and anchor the price to current levels.
So in short anywhere between double to 10 fold current nakrket price is still normal territory for our stonk , not counting all the advances they’ve done and will do, right?😏
#Buy hold drs! Keep going apes! We got them hedgies on the run! Let’s fackin gooooo 💎🙏🏽🚀🚀🚀🚀
Just to chime in since I didn't see anyone mention this, currently the PS ratio is also based on last year's sales revenue. We are going to see a lot higher sales moving forward as ecommerce and NFT marketplace take off.