51–58 of 58 posts
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I got the absurd part but missed the reasonable part.
missed the reasonable part GOOG floated at 100x earnings, and that was really, really good value. 20x revenue seems more-than-reasonable for a high-growth company with a contained cost structure and a clear path to profitability.
Perhaps. It will be interesting if that is still the prevailing wisdom after Europe melts down.
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> assuming you gave them a generous valuation on 20x revenue and completely neglect profitability. The fact that this is a fashionable valuation tells me everything I need to know about the market.
The ratio between revenue and valuation changes over time, based on your growth. I actually tried to draw a kindergarten explanation here: http://blog.foundrs.com/2011/10/27/how-to-compute-the-valuat...
Almost as if it's more psychologically than fundamentally based.
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missed the reasonable part GOOG floated at 100x earnings, and that was really, really good value. 20x revenue seems more-than-reasonable for a high-growth company with a contained cost structure and a clear path to profitability.
> and that was really, really good value. Perhaps. It will be interesting if that is still the prevailing wisdom after Europe melts down.
Google's P/E ratio is ~21 at the moment, and their share price is ~$620.
They floated at a P/E ratio of ~100, and a share price of $85. Their share price would have to drop to below $85 for it not to be good value as an investment, and they would have to drop revenue to around 1/10 the current level for them to be earning less.
Even if I accept the likelyhood that there will be some kind of recession in Europe are you really saying that Google will drop revenues by 10 times? (I'd point out that during the 2008 financial crisis it reduced their revenue by a couple of percent).
That seems quite unlikely.
Can you expand on what you are trying to say?
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The ratio between revenue and valuation changes over time, based on your growth. I actually tried to draw a kindergarten explanation here: http://blog.foundrs.com/2011/10/27/how-to-compute-the-valuat...
> The ratio between revenue and valuation changes over time Almost as if it's more psychologically than fundamentally based.
It is the expectation of future profits by investors.
When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company.
It's fairly common for small, young companies to grow by multiple-hundred percent per year.
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> The ratio between revenue and valuation changes over time Almost as if it's more psychologically than fundamentally based.
Do you understand what "valuation" means? It is the expectation of future profits by investors. When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company. It's fairly common for small, young companies to grow by multiple-hundred percent per year.
More than most people.
> It is the expectation of future profits by investors.
No, that is one component.
> When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company.
Not without more information.
> It's fairly common for small, young companies to grow by multiple-hundred percent per year.
Considering the failure rate of young companies, you have a strange definition of the word "common".
Earlier quoted context omitted.
Do you understand what "valuation" means? It is the expectation of future profits by investors. When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company. It's fairly common for small, young companies to grow by multiple-hundred percent per year.
> Do you understand what "valuation" means? More than most people. > It is the expectation of future profits by investors. No, that is one component. > When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company. Not without more information. > It's fairly common for small, young companies to grow by multiple-hundred percent per y…
Even taking failures into account, multiple-hundred percent per year is still probably pretty common. If a company doubles its revenue in a year that's a 100% increase, and that's not exactly uncommon.
Strangely, investors attempt to pick the winners, not invest in random small companies.
They look at metrics like growth rate, earnings, and cost of customer acquisition to decide what to invest in.
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No, it's still the same. Ugly, slow, and bloated.
This is what's really killing it for me. If it wasn't so slow and bloated, I'd use it much more. Instead, I usually just pull out something quick like AstridTasks or another note program. Only the big stuff I save on evernote.