By CNBC Jim Cramer said on Tuesday investors need to confront a “new formula” to determine winning stocks as long as Wall Street remains worried about Federal Reserve hit the brakes on the warming US economy.
“We have to get used to narrowing valuations to fast growers, especially those that trade on a sell-price basis” “Mad Money” said the presenter, referring to a valuation metric that usually applies to loss-making companies.
“Sooner or later, I think this sell-off will take its course, and I still looking for a Santa Claus rally. That doesn’t change,” he added. But you have to be careful with multiple contractions…in a market that wants solid earnings to apply P/E, not wobbly sales to create a price-sell for multiple. “
Cramer pointed at Dutch Bros to illustrate his point that investors should prioritize companies with earnings and return some of that to shareholders. The Oregon-based coffee chain, which went public in September, is growing fast but not making a profit yet.
That wasn’t a concern for many investors in early fall, he said, as evidenced by Dutch Bros’ shares surging as high as $81.40 on Nov. 1. It closed the session. Tuesday at $49.69. Over the past month, the stock has fallen nearly 20%.
While Cramer acknowledges Dutch Bros can continue on its growth trajectory, adding more stores across the US and achieving sustainable profitability, he said this is not in the best interest of the company right now, he said. with many investors.
“As we worry about the Fed-mandated slowdown and no one is willing to pay for the specter, earnings are likely to be over a decade to come, good luck,” Cramer said. speak.
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