Hello all,
Wanted to get an understanding of the valuations and current valuation levels.
You see, from March2020 to March2023 the valuation has risen between 13-34 times, but the growth in EPS be it QOQ, or QYOY or just YOY does not in any way support this increase in valuations.
Now, I also looked at the revenues, the growth there is nothing that supports current levels of valuations.
One can suggest that “its the back to 2020 levels” theme getting played out.
March 2020 EPS stood at 13.74 and its just 11.49 in March2023 (Mar21 : 4.91, Mar22: 9.56).
Revenues have also growth from 2100 in March2020 to 3268 in March2023, so, about ~50% growth.
Yes there is reversal and growth, but a growth that supports valuations that went from 10-25/share to 348/share as of today?
There also has been a margin expansion from 11% in 2020 to now 16% in 2023. Some quarters have shown 18%. But are we sure even doubling or margins gets us this high of valuations?
I did consider the future prospects and how valuable the product could be, yet such a growth in valuations seems to show that market and participants are expecting the company to evolve in a way that borders and maybe has crossed the exuberance and hubris.
I see many a names that are invested and I ask you all to correct me if I am wrong.
Edited to add this :
I saw a similar thing happening in Dreamfolks and a few other names. The underlying business dynamics in no way supported the valuations.
Hence, I decided to ask the members before forming any opinions.
tl;dr
Trying to understand the logic behind current valuations.
March 2020 :
Revenue 2154
OPM% 11%
EPS 13.74
March 2023 :
Revenue 3268
OPM% 16%
EPS 11.49
March2020 – Closing Price 16
March2023 – Closing Price 214 (13x of 2020)
July2023 – Closing Price 337 (21x of 2020)
Seems extremely overvalued.
Business Fundamentals do not and can not support these valuations, which continue to grow still.
Would like to be proven wrong.
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