Is PROCEPT BioRobotics Stock Worth Holding?

We don’t have to tell our readers that it’s been tough to find many, if any, feel-good stories in the tech market. Based on our risk-averse approach to disruptive tech investing, we’ve been able to stave off the kind of losses more aggressive funds have experienced over the last year. That’s largely because we’ve developed – and continue to tweak – an objective methodology to why and when we invest in a company. 

Revisiting the Simple Valuation Ratio

One metric that we often mention regarding timing is our patent-pending simple valuation ratio. The math is simple enough for an MBA to understand: divide market cap by annualized revenues. The resulting number – lower equals better – is a rough guideline as to how cheap or expensive a stock is based on the size of a company versus its revenue. A $1 billion company with $50 million in revenue is a better value (20) than a $10 billion company with $100 million in revenue (100), even if the latter is bigger on paper and pulling in more money overall. This guideline helps us avoid overpaying for a company no matter how great it looks on the outside.

We originally capped the number at 40, which meant we wouldn’t touch a stock with a ratio higher than that. It was somewhat arbitrary and worked well in a bull market where tech companies were rapidly growing both revenue and market cap. However, last year, many of those tech stocks started trading at bargain prices – many at single-digit ratios – with strong growth but significantly smaller market caps. Here’s a snapshot of the richest tech c