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> world class research arm Honest question: does Wall Street care? In my experience, this is the kind of thing that’s (rightly or wrongly) considered a “cost c
by bch 3y ago
> world class research arm
Honest question: does Wall Street care? In my experience, this is the kind of thing that’s (rightly or wrongly) considered a “cost center”, not a “profit center”.
- bonestamp2 3y agoI think you're right, investors don't really value the research arm until something profitable comes out of it and then they only value that thing that came out of it and not research arm itself. In some sense, that is the right move. For example, Intel was a market leader for decades while their research arm was very stagnant for many years too. Other times, it is short sighted not to price in what might be to come because you miss buying shares on the cheap before a huge technology/product leap.
- ephemeral-life 3y ago> does Wall Street care? Some people on wallstreet do. In Mckinsey's book Valuation, they make it pretty clear to the reader that companies who spend a lot on r&d tend to have outsized returns compared to their counterparts, who don't spend that much.
- bionsystem 3y agoI'd say the whole market gives a premium to companies with R&D spend, that's part of the reason why they have higher valuation metrics (alongside growth, margins and other quant factors). That is, when they are not stupidly burning it or giving it away as stock compensation.