Diane has found a really neat social media stock that is growing like wildfire. It has expected earnings of 10 mm (net income) but it is growing sales 30% per year and earnings are expected to grow 70%. The stock has a market cap of 600mm with net cash of 50 mm and sales projected this year of 150 mm.

Diane says that it looks attractive since it has an attractive PE relative to its growth rate.

What is the PEG ratio of the social media stock?

Diane says that it trades at a price to sales of 4.0X which is less than handful of other emerging social media stocks that trade at 4.5X but with a lower growth rate.

What kind of valuation argument is this relative value or intrinsic value? What is the inherent risk or pitfall in this argument? What is Enterprise Value to Sales?