FEAR & GREED | Business News Ask Fear & Greed: How are companies valued at billions without a profit?
May 15, 2025
Curious about how companies can be valued in the billions before making a profit? Discover the strategies investors use to gauge future earnings, even when profits are elusive. The hosts break down the intricacies of valuing speculative investments and the challenges faced in uncertain markets. Tune in for insights that could reshape your understanding of business valuations!
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Valuation Based on Future Earnings
- Company valuation often focuses on anticipated future profits rather than current earnings.
- Investors buy shares based on expected growth and product potential, not on present profitability.
Risks in Investing in Non-Profitable Stocks
- Stocks of companies without profits can be risky in unstable markets.
- Liquidity issues arise because investors hesitate to sell amidst uncertainty about future returns.
Focus on Expected ROI
- Investment decisions hinge on expected return on investment rather than current company status.
- Future earnings are capitalized to estimate value and potential profit.