Whencomparing companieson aprice-to-salesratio basis,
wehavetobringintheeffectofnetmargins.Companiesthat
havelownetmargins,either becausetheyhaveno pricing
powerorbecausetheyadopthighvolume/lowpricestrategies
(discount retailers, for example) should trade at lower
multiples of revenues than firms that maintain higher
margins.
Bias Summary
Witheachofthevariableswehavediscussedinthissection,
wehave listedsome ofthepotential problemsthatcanbe
createdwhentheyareignoredwhiledoinganalyses.Atthe
risk of repeating much of what we have said, we can
summarizethebiasesthatcanbecreatedbyignoringanyor
all of the variables inTable 8.11.
TABLE 8.11 Comparison Biases Created by Omitting
Variables