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Ultimately, value of a stock rests on the expectation of future earnings of the company.
by TooSmugToFail 7y ago
Ultimately, value of a stock rests on the expectation of future earnings of the company.
- panarky 7y agoSure, the present value of an asset is the discounted sum of future cash flows. But if there is no expectation that shareholders will actually receive any of the future cash flows, then there are zero future cash flows to discount.
- candiodari 7y agoReally ? That's one of those things that is "obviously true", but if you go back to the 80s and measure ... it's not true (back then it was a very low multiple of bankruptcy sale value of the company. Something like 1.2, 1.3 times that, or for a bad company 0.8). So this is something that became true, really in the 90s, and has been true for 25 years or so now. That of course means that it's not actually a law of economics, the way it's always presented. And I must confess myself reluctant to believe this is a permanent situation.