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It should be immediately obvious that they're comparing intrinsic value vs market valuation, so no, it's not tautological at all. Everyone who invests should k
by cynicalkane 16y ago
It should be immediately obvious that they're comparing intrinsic value vs market valuation, so no, it's not tautological at all.
Everyone who invests should know that market value does not necessarily predict intrinsic value, and it becomes more problematic when there's illiquidity, and when only a small fraction of the company is being bought and sold. These are basics, going back to Ben Graham's famous book on value investing, and probably much further back than that.
Even if liquidity and size didn't matter, it's still a basic error to go by last share traded and claim that that represents the actual value of the company.
- kj12345 16y agoExactly. While the technical sense of valuation might be tautological, it's also nowhere near the average person's definition of economic "value" or "worth". A good test in the every-day sense of those words might be if company X were given 3 months to sell off everything and end up with a stack of cash, how much would they have? Apple could stand a chance of getting reasonably near their valuation whereas I'd be shocked if Facebook could.