What is more important: revenue, profits, or market capitalization when valuing a company?

1 Answer

  • Amy
    Lv 7
    1 month ago

    Revenue is mostly useless. A company could spend $100 to make a product and sell it for $99. Their revenue is $99, but they're not a company worth investing in. Revenue does tell you how popular the company is.

    Profit tells you what the company is actually earning. It will often be the most important number, depending on what you are trying to measure.

    Market cap is what the stock market is willing to pay for the company. It's the consensus opinion of a bunch of experts as well as a bunch of idiots. This value is based on the company's recent profits, a prediction of future profits, and the value of physical assets (equipment, land, etc) owned by the company.

Still have questions? Get your answers by asking now.