Valuation is tough for speculative-growth companies, and it's especially tough for an Internet company like Yahoo.
Many of these companies have no earnings, and even when they do, ordinary valuation methods such as price/earnings rations tend to go out the window.
One popular way to value Internet companies is to look at the price/sales ratio and compare them with similar companies.
At the end of 1999, Yahoo traded for more than 200 times sales. That's more expensive than any of the other major Internet stocks, such as dBay EBAY (120 times sales), America Online AOL (30 times sales), or Amazon (22 times sales).
Even among the notoriously pricey Internet stocks, Yahoo is expensive - but you could make a case that its huge audience and consistent profitability make it worth a premium.
Comment: The Internet bubble soon burst in 2000.
Many of these companies have no earnings, and even when they do, ordinary valuation methods such as price/earnings rations tend to go out the window.
One popular way to value Internet companies is to look at the price/sales ratio and compare them with similar companies.
At the end of 1999, Yahoo traded for more than 200 times sales. That's more expensive than any of the other major Internet stocks, such as dBay EBAY (120 times sales), America Online AOL (30 times sales), or Amazon (22 times sales).
Even among the notoriously pricey Internet stocks, Yahoo is expensive - but you could make a case that its huge audience and consistent profitability make it worth a premium.
Comment: The Internet bubble soon burst in 2000.
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