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1/ $CRM IPO'd in 2004 at $4/share and a 16 PS. Since then the stock has gone up 56X in 16 years (~29%/yr).
If it IPO'd at $8/share and a 32 PS is would have done 28X in 16 years (~23%/yr).
If it IPO'd at $16/share and a 64 PS (!!) it would have done 14X in 16 years (~18%/yr).
If it IPO'd at $8/share and a 32 PS is would have done 28X in 16 years (~23%/yr).
If it IPO'd at $16/share and a 64 PS (!!) it would have done 14X in 16 years (~18%/yr).
2/ Some may say this is survivorship bias, & that other high valuation businesses did not perform like $CRM did.
But the truth is what differentiates $CRM from those other businesses is sustained revenue growth.
But the truth is what differentiates $CRM from those other businesses is sustained revenue growth.
3/ This just means more focus should be spent thinking about the competitive position of the business and whether its end markets are large enough to support sustained revenue growth, rather than focus on valuation.
4/ Having said that, if it is determined that the competitive position of the business is not strong and/or the end markets are not large enough, valuation should obviously be of primary concern.
