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No. of Recommendations: 6
Is the ‘frothy’ market full of these in 2021? High valuation is different from no earnings, no?
That does seem to be different (so far) with many of this era’s companies.


Sure, high valuation is different from no earnings.

The best valuation metric for almost any firm, growth or not, profitable or not, is the current price being asked for the trajectory of future earnings.
If a firm is going to have nice earnings 5-10+ years from now, there is no need to see earnings today.
Similarly, if a firm has steady flat earnings, there is no need for growth for it to work out fine.

The overvaluation comes in when the current price is crazy even relative to plausible future earnings.
That situation seems pretty widespread at the moment, though it's a judgment call on what's plausible.

Some firms are so hard to predict that it's a meaningless question.
Those could probably be characterized as "not demonstrably overvalued, but probably still not a sensible way to risk your money"
Unless you're getting them so cheaply that it's a sensible long-odds bet, which doesn't seem to be the case these days.

In unrelated news---
Two more profitless EV firms went public by back-door SPAC merger yesterday.

Jim
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