I put 9 AI networking stocks side by side again, using their October 8 closing prices. $MRVL , $LITE , and $ALAB are among them; I won’t name every other one.
The biggest thing that jumped out is that in a sector where gross margins range from 12% to 75%, looking only at EV/Sales can really lead you astray.
Switch to EV/Gross Profit, and these stocks immediately split into two groups: one at 55–71x, the other at 22–23x.
This divide is much more interesting than looking at revenue multiples alone.
The biggest thing that jumped out is that in a sector where gross margins range from 12% to 75%, looking only at EV/Sales can really lead you astray.
Switch to EV/Gross Profit, and these stocks immediately split into two groups: one at 55–71x, the other at 22–23x.
This divide is much more interesting than looking at revenue multiples alone.