$NANO.L - I am sceptical about its valuation

Nanoco (LON:NANO) make Quantum Dots which can be used in things like LCD TVs. So there’s a huge potential market for it in that segment alone, and Dow Chemical has taken a very real interest in the company.

There are investors that I am highly respectful towards who are actually very bullish on this stock, so I stand to look very foolish in this post.

I have to admit that I am very sceptical about current valuations for this company. In my own crude way, I might look at this and say “could this company generate £100m in revenues. If so, then I might put a valuation of £300m on it”. Very very crude way of looking at it, to be sure. Incidentally, I later discovered that the semiconductor sector is trading on a median PSR of 3.46, so my finger-in-the-air multiple of 3 was actually surprisingly close to the mark.

It’s not that I don’t think the bulls are necessarily wrong, or that I think it can’t make those kinds of revenues. But, in my mind, the problem is, even if I’m right, it’s very difficult to get paid off. By a stroke of coincidence, at...