InvestorQ : What are the financial parameters and non-financial parameters I can evaluate for such loss making IPOs?
vidhya Laxmi made post

What are the financial parameters and non-financial parameters I can evaluate for such loss making IPOs?

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sarah Leo answered.
6 days ago
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Before getting into financials of a digital stock, apply the test of network effects and whether it is working or not. For leaders like Zomato, Paytm and Byjus, surge in demand attracts more vendors and quality content, which in turn attracts more customers. This is how digital companies grow profits and valuations. Network effects actually happen in digital stocks when supply and demand get into a virtuous cycle.

In digital stocks, you cannot apply traditional PE / PECV valuations but there are other models. Firstly, check if the losses are consistently narrowing at operating level. Secondly, look at whether the peak promotion spend is done and the digital play can get publicity benefits while saving on promotion costs. Lastly, look for global benchmarks of Price to sales ratio and EV / EBITDA ratio to arrive at an evaluation. You are all set to invest in digital IPOs.

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