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Get used to shrinking valuations for high-flying stocks

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CNBC’s Jim CramerInvestors must confront Tuesday a “new method” to identify winning stocks, as Wall Street continues to be concerned about them. Federal ReserveBreezing down the U.S. economic heat.

We must learn to accept shrinking values for fast-growing companies, particularly those that are priced-to-sales. “Mad Money”Host said this, in reference to “a”. valuation metricIt’s commonly used for unprofitable firms.

“Sooner, or later, this sell-off will be over, and that’s what I expect to happen, and I hope you are with me.” still looking for a Santa Claus rally. “That has not changed,” he said. But you have to be aware of multiple contraction in markets that want solid earnings and not weak sales to increase the price-to-sales ratio.

Cramer noted Dutch BrosHe argued that investors should reward companies with high-earnings and return some of these earnings to shareholders to show his point. This Oregon-based coffee chain went public in September. growing fast, but it’s not yet generating a profit.

He said that investors didn’t have to worry about this earlier in fall. This is evident by Dutch Bros shares reaching $81.40 on November 1. The stock closed at $49.69 on Tuesday. The stock has fallen nearly 20% in the last month.

Cramer admitted that Dutch Bros could continue its growth path, opening more U.S. stores and reaching sustainable profitability. However, it is not something investors are thinking about right now.

Cramer explained, “When there’s a Fed-mandated slowdown but nobody’s prepared to pay for the phantom or possible earnings over a decade, then well, good luck.”

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