Value Is Valuable

This topic contains 5 replies, has 1 voice, and was last updated by sisco farraro 2 weeks, 3 days ago.

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  • #750113 Reply

    Chaz

    Just time for me to go on a little rant about something that isn’t politics.

    For too long the current world has been looking at performance as a quarterly thing. Judging performance based on revenue rather than profit is stupid. Judging a company’s worth based on its share price is inane. It may be coming to a point where there might be some return to sanity.

    Good grief, some people asked Musk about profitability and he went off in a huff.

    Small time investors are going to get creamed when the market’s movers-and-shakers switch from driving the market on spec and return to looking at worth and profitability.

    Are you ready, it’s coming.

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    #750123 Reply

    Ron Benn

    Chaz, the old adage about a fool and his money being easily parted comes to mind.

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    #750120 Reply

    Chaz

    Here’s a little question that quantifies my mind-set.

    What car company sold its first car on July 23, 1903 and managed to turn a profit by Oct. 1, 1903?

    While not every start-up can turn a profit in 70 days, turning a profit must come within a reasonable period of time. I would not say that. If you ain’t there in the first three years, then give up but …

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    #750207 Reply

    sisco farraro

    Chaz. I too wondered why revenue was viewed as a more important measure than profitability. Now consider the following. Company A has revenues of $1 million in the current fiscal year and is very good at managing expenses so that its profitability is $400 thousand. Company B has revenues of $10 million during the same period but profitability of only $100 thousand. Let’s assume these companies sell to the same market..

    Although company B is reporting less profits currently it has captured a larger percentage of the market. Hence it has a larger base of existing customers that it can sell additional products to. Perhaps additionally some of the increased expenditures of Company B are being used to create new or secondary products to grow its existing client base or expand into new markets.

    In light of this, the argument in favour of revenue does have merit.

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    #750239 Reply

    Chaz

    Sisco,
    The “perhaps” is the key. Perhaps the lousy performer will become profitable,  perhaps you will get a return on investment, perhaps if I bet on No. 17 often enough that little ball might, maybe, hopefully land in 17.

    Spec is gambling pure and simple and if one doesn’t have the bankroll to lose then the little guy better not go “all-in”.

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    #750353 Reply

    sisco farraro

    Thanks, Chaz. The world of business is just as precarious as the world of politics. Let’s go back to my illustration using companies A and B.
    Seeing that company B has captured more of the market share, Company A hires a hot shot CEO who, lo and behold, is just as capable of making bad decisions as all of us and within 17 months Company A files for bankruptcy.
    No matter how you peel the onion, the one over-riding principal in the world of investment is “caveat emptor”. (Since the Bulldog centres more on politics than investment, this can be re-stated as “let the voter beware”.)

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