1. Price a story-stock IPO on sales against an established comp
The repeatable method
- For a money-losing newly-listed company, P/E is meaningless — anchor on price-to-sales instead, using the IPO price × share count (or the stated valuation) over latest annual revenue.
- Find the closest profitable, public comp that makes similar gear and compute its P/S on the same basis.
- The ratio of the two multiples tells you how much growth the market is pre-paying. A gap of 5×+ means the stock is priced for a steep, specific ramp — not a value entry.
Here: EROC at ~$5.9B / $183M 2025 sales ≈ 32× sales, vs CAT at ~6× — so the market is paying ~5× the peer multiple on the promise of growth. The 5% debut dip barely dents that.
Watch for
- Any AI-infrastructure IPO whose P/S is a large multiple of an incumbent's; lock-up expiries that add supply to a richly-valued float.
2. Buy the seller of the workaround to a hard bottleneck
The repeatable method
- Identify a binding physical constraint in a boom (here: multi-year grid-interconnection queues for data centers in Texas/Pennsylvania).
- Find the company selling the bridge around it — on-site/behind-the-meter generation that delivers "speed-to-power" while customers wait for the grid.
- The longer the queue, the deeper the demand: the constraint itself is the moat. Note any product edge that widens adoption (quieter, lower-emission → easier community/permitting acceptance).
Here: EROC's "rockblock" gas gensets are bought as backup/temporary power until grid hookup; the yearslong wait is exactly why adoption is rising. Competitors doing the same: CAT, GNRC, CMI.
Watch for
- Interconnection-queue lengths by state; permitting/emissions rules that favor cleaner gensets; whether the bottleneck eases (which would erode the bridge demand).
3. Validate the demand with customers + backlog, not the pitch
The repeatable method
- Check who is buying — marquee, credit-worthy customers are third-party proof the product works at scale.
- Weigh the backlog (contracted future revenue) against current revenue to gauge the forward ramp, and against current losses to gauge the gap that must close.
- Confirm the company can physically deliver — capacity additions must be able to convert the backlog.
Here: customers META, MSFT, HNHPF (Foxconn); $1.3B backlog vs $183M 2025 revenue; capacity ramping to 1.2 GW/yr by year-end (> the ~1 GW installed base). The proof points are real — the question is conversion.
Watch for
- Backlog-to-revenue conversion each quarter; customer concentration; whether capacity guidance is actually hit.
4. For a "priced-for-ramp" name, name the milestone that breaks it
The repeatable method
- When a stock trades at a rich multiple on losses, write down the specific operational milestone the price assumes (capacity online, backlog billed, path to profitability).
- Decide in advance what evidence would confirm or kill the thesis — a missed capacity date or a stalled backlog is the tell, not the share price.
- Size the position to the binary nature of the bet; a 32× name re-rates hard if the ramp slips.
Here: the bull case rests on "growth will ramp soon" — 1.2 GW/yr capacity by year-end and conversion of the $1.3B backlog. If those slip, ~32× sales on a $59M loss has a long way to fall.
Watch for
- The year-end capacity target; quarterly revenue acceleration vs the Q1 $32M run-rate; first signs of operating leverage (narrowing losses).