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On paper. Stock valuations are pretty crummy anyways. They are only an indicator of potential earnings (that's why a stock can go down when earnings are good:
by lukeqsee 16y ago
On paper.
Stock valuations are pretty crummy anyways. They are only an indicator of potential earnings (that's why a stock can go down when earnings are good: the forecast was bad).
No, that doesn't prove the article. Any company has the potential to be "worth" more than <x company>. It's a moot point.
Enron looked great on paper. It was worth nothing. Bernie Madoff looked great on paper. He was worth nothing. Facebook looks great on paper, but in reality they are just hitting profitability. We'll see how long they last.
- brown9-2 16y agoWhat other method is there for us to measure "worth" though?
- blazamos 16y agoFuture earnings.
- lukeqsee 16y agoThat is a valid question. I don't know if there is a better way. I was pointing out the flaws in what has proved to be an otherwise very good system. In reality, privately held companies are very hard to gauge in raw worth. When (and if) Facebook has an IPO, we will get a better idea what the broad market values it at, instead of what individuals very close to the company value it at.
- Retric 16y agoActual cash flows are worth more than potential cash flows. Realistically you need to sum the probably of profit discounted by your risk tolerance. A dollar is actually going to be worth a little less in the future, but it’s extremely likely to be worth something. Gold value is a little more random but it’s slightly less likely to be worth nothing. All the way out to lottery ticks which are worth more as entertainment than their inherent cash value.