It’s not a useful metric because some companies have high margins (perfume, advertising, software) and some have low margins (grocery stores, space launches), and mandatory huge capital/cash reinvestment (AI, space launches). The reason to use a multiple to revenue is because of unprofitability. But all stock price is a function of profit and expected profit growth rate… usually.
10x is considered normal for big corpos.
For growing companies and startups with (perceived) bright future it can go up to 40x, but only for a short time during initial growth stage.
Edit: SpaceX P/E ratio at the IPO is 94. Which is insane.
What is the normal ratio of annual revenue to valuation?
It’s not a useful metric because some companies have high margins (perfume, advertising, software) and some have low margins (grocery stores, space launches), and mandatory huge capital/cash reinvestment (AI, space launches). The reason to use a multiple to revenue is because of unprofitability. But all stock price is a function of profit and expected profit growth rate… usually.
10x is considered normal for big corpos.
For growing companies and startups with (perceived) bright future it can go up to 40x, but only for a short time during initial growth stage.
Edit: SpaceX P/E ratio at the IPO is 94. Which is insane.
Nvidia trades at x22
10x
Something bellow 4. Something bellow 7 in industries that need a lot of capital to make a little revenue.
4 P/E would be insane. Please show me a health company in any time in modern history with the P/E ratio that low.
Everybody here is talking about P/S, not P/E.
SpaceX P/E is negative.