It's interesting to compare appen with pro medicus, which is a...

It's interesting to compare appen with pro medicus, which is a stock somebody mentioned here. These 2 stocks are the black and white, fire and ice, north and south, rich and poor, of ASX. I saw a number of posts about appen being hilariously cheap based on P/S while it was above $1.

At $0.28 and 0.65 FX rates, appen now has a P/S 0.20, assuming only google's revenue loss is counted and rest of their customers spend the same amount this year. Not to mention the $32M net cash at end of december, =$49M AUD cash = $0.23 net cash / share, 5 cents lower than current share price, yet appen continues to make new all time low everyday. Pro medicus has a trailing P/S of 82.54, that's S not E, yet continues to make new all time high everyday.

I thought PME was overpriced in 2022 at $40, and believed fair price to be $30 at most. Because I focused on the current p/e and not the underlying business fundamentals, dominant leader with 30-40% revenue CAGR while continuing operating leverage at 40%+ statuary NPAT and still increasing to almost 50% now, monster contract wins every now and then. Statuary GAAP NPAT means a lot more than the manipulated false information non GAAP / adjusted NPAT you sometimes see used by analysts and companies. PME doesn't even spend money on marketing and still grows like crazy. The same reasoning applied to appen when it was above $1, market knew the future of both of these businesses and priced them accordingly.

Most of the time, conventional valuation analysis does show whether a stock is over/under valued, as forecasts tend to come in as expected and the valuation is based on a very low implied WACC (overvalued) or very high implied WACC (undervalued). But in special cases, like APX and PME, one needs to look at the business fundamentals, because the forecasts might be very wrong, to the upside or downside.