Trying to satisfy an insatiable appetite for growth, investors don't mind placing big bets on companies such Salesforce.com, expecting out-of-this world future performance.
As a result, Salesforce continues to enjoy a multiple that is sky-high and offends investors like me who stress realistic P/E ratios.
Disappointingly, the argument continues to be that valuation does not matter in the tech sector. That's all well and good so long the roulette wheel keeps spinning. But what happens when it stops -- and on the wrong color?
Though the company continues to generate a considerable amount of interest from investors, the odds are stacked against it because it is already priced to perfection while rivals such as SAP (SAP) produce higher margins and increased levels of profitability.It's worth mentioning that Salesforce.com hasn't earned a profit for almost a decade while its gross margins have shown some erosion over the past several quarters. Yet the stock rises. In situations like these, one slip can be catastrophic. But will investors know what to look for? While the tech sector as a whole continues to lead the stock market, it seems that Wall Street is being reckless and cavalier toward valuations of stocks such as Salesforce.com. Individual investors would be wise to get a life and move on. Follow @rsaintvilus At the time of publication, the author held no position in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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