Some simple math suggests the valuation of XRO is broken. Assume...

Some simple math suggests the valuation of XRO is broken. Assume they can normalize earnings to 25% of sales. They can't - as their market will eventually become competitive - but give them the benefit of the doubt. 25% of 2014 sales suggests $17.75M in hypothetical earnings. Against a valuation of $3060M, they have a PE in excess of 170, against 80% growth.

In reality, if they ran the company in a way to make a profit, they wouldn't grow. It's 1999 logic all over again, sacrificing profitability for market share. So against a more realistic eventual growth rate of maybe 25% - in line with what they would need to do to show a profit of 25% - they are even more hysterically overvalued.

Maybe it quadruples and maybe it loses 75% of its value. It's a rah-rah momentum stock for gamblers. It's a random number generator, not an investment.