NEW YORK - Inktomi is one of the stocks featured in Larry Waschka's new book, Ten Stocks That Could Change the World. Foster City, Calif.-based Inktomi specializes in search software and applications for speeding up Internet traffic. Customers include high-profile names such as Yahoo! and Reuters.
Waschka surely didn't pick Inktomi (nasdaq: INKT - news - people) for its profitability. In 2000 the company lost $9 million, or 9 cents a share, and is expected to earn less than a penny a share this year.
"I don't use multiples such as P/E," says Waschka, a hedge fund manager and author of The Complete Idiot's Guide to Getting Rich and co-author of Managing Family Trusts. To value these stocks, Waschka prefers to use ratios such as price-to-tangible book value (book value excluding goodwill) and price-to-sales (price divided by trailing sales per share). In fact, based on trailing 12-month sales, Inktomi's price-to-sales ratio comes in at 6. Waschka calls a price-to-sales ratio of 10 ideal for a company that has superior growth potential.
Full story at Forbes.com