The Spread Between High & Low Growth Firms Has Never Been Greater


Over the past decade we have closely watched the unprecedented divergence between growth and value stocks, which has made 13-year-old momentum-chasing Robinhooders millionaires, while bankrupting countless seasoned value investing titans.

However, as our friends at Kailash Concepts show, there is another historic divergence worth noting. The chart below shows the following:

  • Light Blue Line: The Price to Sales ratio of the firms in the S&P500 with the fastest revenue growth
  • Dark Blue Line: The Price to Sales ratio of the firms in the S&P500 with the slowest revenue growth

The fastest growers have almost never been more expensive and conversely the slowest growers have almost never been cheaper. Most importantly, the spread between the two has almost never been wider.

Those curious for more may find value, no pun intended, in Kailash’s May 2016 white paper, “The Revenue Wreck – Are We Paying Rational Prices for an Ex-Growth America?”



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