Workday. Cloud computing stocks might be all the rage with investors, but savvy investors know when a stock is too sky-high. Workday's net operating profit is nowhere near it needs to be to justify its market value of $13 billion, says New Constructs.
The company needs to boost revenue by 40% a year on average for a decade, no small order, while keeping its net operating profit after taxes margin of 9% to grow into its valuation, New Constructs says.
Costamare. The container-ship company is a good example of why just looking at a P-E doesn't tell the whole story. Despite its P-E of 16, which is roughly in-line with the market if not slightly below, the company has been loading up with debt.
The company now has $1.9 billion in debt, which is greater than its market value, says New Constructs. It's taking on this debt because its burning cash on a free cash flow basis.
The company needs to grow its net operating profit after taxes by 11% a year for 17 years before its valuation makes any sense, says New Constructs.