4 ms·

Market cap is kind of made up. The stock is worth what people believe it to be worth. Profit is the number that really matters.

aurareturn 2y ago
>Market cap is kind of made up. For a public company, it's all about return on investment, right? Market cap is the most important factor in return on investment right? Therefore, market cap is the most important measure.
- tjoff 2y ago
  Oh, I should only invest in companies with the biggest market caps?
  - aurareturn 2y ago
    Sure, if you think they can increase their market caps by the highest percentage and have enough liquidity for you to exit if you wish.
  - deleted 2y ago
    [deleted]
  - basiccalendar74 2y ago
    you invest in companies that would be biggest market cap in future.
- diffeomorphism 2y ago
  > Market cap is the most important factor in return on investment right? Completely wrong. Hint: You are on HN. Startups obviously don't start at a large market cap.
  - aurareturn 2y ago
    I'm not wrong. You just interpreted me wrong. I didn't say you should invest in companies already with a big market cap. I said market cap increasing is the ROI to investors (besides dividends, which is mostly irrelevant when investing in tech companies). That's exactly how startups work. You invest at a cap of $50m. Its market cap increases to $1 billion. You just made 20x (provided you have liquidity).
jraby3 2y ago
Profit and expected future profit (based on growth rate) is one of the ways a (non publicly traded) company is valued. Theoretically that's how price targets are created by analysts. So market cap is explainable through that metric. Profit this year and no growth vs. the same profit this year and double profits next year should lead to different market caps, and it generally does.
YetAnotherNick 2y ago
By that logic even dollar value is made up. And profit in dollars too. Market cap should be equal to the expected discounted profit.

aurareturn 2y ago

>Market cap is kind of made up. For a public company, it's all about return on investment, right? Market cap is the most important factor in return on investment right? Therefore, market cap is the most important measure.

tjoff 2y ago
Oh, I should only invest in companies with the biggest market caps?
- aurareturn 2y ago
  Sure, if you think they can increase their market caps by the highest percentage and have enough liquidity for you to exit if you wish.
- deleted 2y ago
  [deleted]
- basiccalendar74 2y ago
  you invest in companies that would be biggest market cap in future.
diffeomorphism 2y ago
> Market cap is the most important factor in return on investment right? Completely wrong. Hint: You are on HN. Startups obviously don't start at a large market cap.
- aurareturn 2y ago
  I'm not wrong. You just interpreted me wrong. I didn't say you should invest in companies already with a big market cap. I said market cap increasing is the ROI to investors (besides dividends, which is mostly irrelevant when investing in tech companies). That's exactly how startups work. You invest at a cap of $50m. Its market cap increases to $1 billion. You just made 20x (provided you have liquidity).

jraby3 2y ago

Profit and expected future profit (based on growth rate) is one of the ways a (non publicly traded) company is valued. Theoretically that's how price targets are created by analysts. So market cap is explainable through that metric. Profit this year and no growth vs. the same profit this year and double profits next year should lead to different market caps, and it generally does.

YetAnotherNick 2y ago

By that logic even dollar value is made up. And profit in dollars too. Market cap should be equal to the expected discounted profit.