Derating is the most destructive force of nature in markets. And it is brutal, because the trigger has nothing to do with performance nor risk free rates. In Gerald Loeb words "Nobody knows what cheap or dear is. Buyers of one stock at 40x will not buy it at 10x later. It is psychologic."
Microsoft and Tencent had the same P/S 2019-2021, around 10x. Since then:
-Tencent has doubled net income and FCF, but P/S halved to 5x, and the stock is trading 30% below 2021.
-Microsoft net income is up just 30%, but the P/S has gone to 14x, so stock is up 80%. Both bought back the same number of shares too.
Imagine the day Microsoft derates from 14x to 5x (which btw is software avg historical P/S, and MSFT traded below that for 8 years 2008-2016).