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by rwissmann
4321 days ago
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Nice catch. However, Labcorp has almost no revenue and profit growth in an increasingly competitive industry. A valuation at 15.5x LTM profit does not seem unreasonable. Comparing the valuation of a growing startup with a stagnant incumbent is always going to look strange if you only consider a snapshot of financial numbers. |
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I think Theranos is overvalued by a factor of ten fold.
The market eventually forces a sane valuation on companies based on revenue and earnings. It's extraordinarily unlikely a company charging vastly less for its products will produce a dramatically greater economic outcome than Labcorp which dominates the industry (Labcorp has the best of both worlds, high prices, and high market share, the only thing they could improve is volume).
Theranos investors have had all their future returns pulled forward. Even in a wildly successful outcome, Theranos is unlikely to be worth much more than 2x what they already are, 20 years from now. That assumes they can one day grow to have ten billion in sales and a billion in profit, based on much lower prices and higher volume. That day is so far off, there's zero chance of Theranos sustaining their crazy valuation between here and there as capital markets turn negative after this hyper bull market run.