Chasing hot growth stocks? Beware of those that sell for 100 times revenue. To say these represent the triumph of hope over experience is putting it mildly.

For many years, I’ve published a warning list of stocks that sell in that rarified range. Starting in 2000, I’ve compiled 20 lists, bad-mouthing a total of 89 stocks. Here are the results thus far.

Your chance of losing money when you invest in these high fliers is 71%. Your chance of doing worse than the Standard & Poor’s 500 Total Return Index is 82%.

The average return for all 89 stocks has been a loss of 19.1%. Meanwhile, the average return for the S&P 500 has been a gain of 10.8%.

Last Year

To be sure, you might catch lightning in a bottle. Two of the stocks I warned against last year — Revolution Medicines Inc. (RVMD) and AST SpaceMobile Inc. (ASTS) — shot up 141% and 202% respectively.

As a result, my warning list last year paradoxically returned 41.3%, beating the S&P 500 at 15%. Score one for the high-priced crowd, but that’s not the way it usually goes. In 15 years out of 20, the warning list has trailed the index.

Three of the stocks on last year’s list did indeed fall. Trump Media and Technology Group Corp. (DJT) dropped more than 63%. Strategy Inc. gave up more than 62%. And IonQ inc. (IONQ) declined 10%.

Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.

Sky-high

What stocks are priced in the stratosphere now? Wait, not the stratosphere, make that the ionosphere. The average stock these days sells for about 3.4 times revenue, and that’s well above the historical average of about 2.4.

The price-to-revenue ratio is less popular than the price-to-earnings ratio, but it has some advantages. Notably, it can be used to evaluate companies with scant earnings, or none.

Stocks that sell for 100 times revenue are typically fledgling companies (often biotech or robotic companies) with a product or service that excites people’s imagination. When investors pay an extravagant price for a stock, the company may do fine, and the stock may still flop.

Expensive Now

On this year’s warning list, I’ll mention five companies in a variety of industries.

AST SpaceMobile Inc., which gave me a black eye in the past year, sells for 1,150 times revenue. The Midland, Texas, company had revenue of about $57 million last year, and analysts project that to grow to $747 million in 2027.

AST makes satellites and intends to provide cellular service to people not covered by existing cellular networks. Some people on Reddit and various stock bulletin boards adore it. Analysts are less keen, with only four out of 11 recommending the stock.

Quantum Computing Inc. (QUBT), based in Hoboken, N.J., aims to sell quantum computers that can operate at room temperature and low power. Its stock has more than quadrupled in the past three years and sells for about 2,700 times revenue.

Many people believe quantum computing soon will become a major part of the technology industry. My only comment is the field is rich in competition.

Terrestrial Energy Inc. (IMSR), out of Charlotte, is working on nuclear reactors, specifically Integral Molten Salt Reactors (hence the stock symbol). Revenue last year was less than $1 million, but the company’s market value is about $570 million.

The company went public in October, when it was acquired by a special purpose acquisition company called HCM II Acquisition Corp. Since then, the stock has fallen 62%.

Aurora Innovation Inc. (AUR), with headquarters in Pittsburgh, makes technology for self-driving cars. So far, it is concentrating on truck routes in Texas and Arizona. Its peak revenue so far was $82 million in 2021; last year it was about $2 million.

Again, my concern is competition. In the self-driving-vehicle realm, Aurora’s competitors are abundant and well-financed.

Finally, Trump Media & Technology Group Corp. (DJT), the parent of Truth Social, sells for more than 600 times earnings. The stock, which went public in March 2024, is supported by the loyalty of President Donald Trump’s followers.

However, Trump Media’s revenue has been stagnant in the neighborhood of $4 million, and the stock has lost about 81% of its value since the public offering.

Can I be certain these stocks will go down? By no means. But I am sure that if you invest in them, the odds are stacked against you.

Disclosure: A hedge fund I manage has a short position in Strategy Inc.

Copyright ©2026— Trib Total Media, LLC (TribLIVE.com)