Not "sales" is in "discounted prices." "Sales" as in "having anyone
from us." Leuthold published two interesting research pieces lately, one of which looked at the fraction of the large cap universe whose stocks trade at price/sales ratios of 15 or more. (15 is rather more than twice the value assigned to Apple.) At base, investing in those companies is an act of pure hopefulness: "sure, they're not selling much now, but they're gonna explode
onto the market next year!" They found that the share of such firms is at a record.
The more recent study extended that into the small cap space which is subject to weirdness not seen in large caps: the prevalence of companies with absolutely zero sales. Such companies don't appear in a calculation of high p/s ratio firms because there's no "s" to put into the denominator. So Leuthold plotted high p/s along with no-sales firms.
They note that buying such firms is a "distinctly inferior strategy over time" when measured by their subsequent returns, and that "there does seem to be a relationship" between spikes in the prevalence of such firms and subsequent market declines.
For what interest that holds,