Technology stocks have been hit hard over the last couple of days, with the massacre beginning on June 9 at around 11:30 a.m. Eastern time. Selling across the sector was indiscriminate, with nearly every major stock getting hit. The question that emerges is: Are all tech stocks created equal? Could there be some in the group that are overvalued while others are fairly valued? Just because a stock is "up a lot" doesn't mean it is overvalued. It has to be overvalued to something, but the "something" is the part that matters the most.

Even with the drawdown during the last couple of days, the tech sector has had an incredible run in 2017, with the Technology Select Sector SPDR ETF (XLK) up almost 16 percent, easily outpacing the S&P 500.

S&P 500 Year to date performance vs. the Technology SPDR ETF XLK

XLK data by YCharts

When exploring the top 25 holdings within the technology ETF, we see that the hardest-hit stocks were Nvidia Corp. (NVDA), Applied Materials Inc. (AMAT), and Broadcom Ltd. (AVGO), but these stock have also been among the big gainers in 2017.

Technology stocks performance year to date

(Data Provided by YCharts)

One can understand why the stocks that have performed the best get hit the hardest, mostly because of profit taking. But what about those stocks in the middle, the stocks that haven't performed the best? What about the stocks that aren't just up on "hot air?"

Technology stocks price to sales ratios and valuations

(Data Provided by YCharts)

Certainly, companies like Facebook Inc. (FB), Salesforces.com Inc. (CRM), and Adobe Systems Inc. (ADBE) are among the fastest-growing tech businesses in the sector when it comes to revenue growth. Revenue at Facebook is expected to surge by almost 57 percent over the next two years. When looking at the price-to-sales ratio, you can see that Facebook has a lofty ratio just over 7.

The average within the group is almost 5, with a standard deviation of almost 3, meaning that Facebook at 7 is within the range of fair value compared to its peers, with the upper bound of 8 and the lower bound of 2. This means that a stock with a P/S ratio over 8 is expensive, and stocks with a ratio below 2 is cheap.

technology stocks price to sales ratio adjusted for growth

Keep in mind that investors pay premiums for growth and discounts for the lack of growth. It's fair to say to that a company growing at nearly 57 percent deserves to trade at a premium, while a company not growing should trade at a discount to adjust for growth. We can divide the price-to-sales ratio by the expected growth rate. IBM (IBM), which has a P/S ratio of 1.86, appears "cheap," but you are paying nearly two times sales for a company with no growth. When adjusted for growth, which is simply (P/S) / (Growth Rate * 100), we find that IBM is incredibly expensive. By comparison, PayPal Holdings Inc. (PYPL) is among the cheapest.

When stocks go up a lot, that doesn't mean they are in bubbles or they "should" come down. When stocks go up, there is generally a fundamental reason for it. The reason why stocks like Facebook, Adobe, and Saleforce.com have been going up is because the companies are growing and are expected to continue to grow rapidly. If there is a fundamental change and those expectations change, then one must re-evaluate. But at this juncture, there is no evidence of that.

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