Recent years have seen the performance of unprofitable growth stocks heavily influenced by the trajectory of inflation and interest rates.
“Unprofitable growth stock EV/Sales multiples have compressed from 14x in 2021 to 4x today, but this change appears appropriate in relationship to the shift in the interest rate environment,” Goldman strategists said in a recent note. “This dynamic has made valuations for unprofitable growth stocks more sensitive to changes in interest rates relative to their profitable peers,” Goldman’s team noted.
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