Is CRWD Stock Overvalued At $460?

Core Viewpoint - CrowdStrike Holdings is considered overvalued at a price-to-earnings ratio of 122 times its adjusted trailing earnings, despite its impressive growth performance [1][6]. Group 1: Valuation and Growth - CrowdStrike's price-to-sales (P/S) ratio is 28.1, significantly higher than the S&P 500's 3.2, indicating a premium valuation [2]. - The company has achieved an average revenue growth rate of 40% over the past three years, compared to the S&P 500's 6.3% [2]. - In the most recent quarter, CrowdStrike's revenues grew by 20% to $1.1 billion, outperforming the S&P 500's growth rate [2]. Group 2: Profitability - Reported operating income for the last twelve months was -$252 million, resulting in a negative operating margin of -6.1% [3]. - On an adjusted basis, the operating margin was 20.3%, excluding stock-based compensation and one-time expenses [3]. - The company generated an operating cash flow of $1.4 billion, leading to a cash flow-to-sales ratio of 33.4%, which is significantly better than the S&P 500's 15.7% [3]. Group 3: Financial Stability - CrowdStrike has a debt of $785 million against a market capitalization of $122 billion, resulting in a low debt-to-equity ratio of 0.6% [4]. - Cash and cash equivalents amount to $4.6 billion, representing 53% of total assets, which is substantially higher than the S&P 500's 14.8% [4]. Group 4: Market Resilience - CrowdStrike's stock has shown greater volatility during market downturns, with a 58.3% decline during the 2022 Inflation Shock, compared to the S&P 500's 25.4% [5]. - During the 2020 Covid pandemic, the stock fell by 50.0%, again worse than the S&P 500's 33.9% decline [5]. - Although the stock recovered to pre-crisis levels, its higher volatility indicates weaker resilience during market crashes [5]. Group 5: Future Outlook - Current consensus estimates project average sales growth of 21% over the next couple of years, a slowdown from the previous three-year average of 40% [7]. - Given the high valuation and potential for a broader market downturn, it is suggested that now may not be the best time to invest in CrowdStrike stock [8].