A stock’s price is theoretically the current value of a long term stream of income adjusted by the risk factor around its growth (positive or negative).
Revenue is interesting but only to the extent that it indicates earnings. This is because any two people can create two companies with a billion dollars in revenue but it is much more difficult to build one with a billion in earnings.
Valuation has only a fleeting relationship with revenue. In the traditional sense valuation is essentially the cash returned to shareholders discounted over time. Walmart’s margins are thin. That’s why their valuation is much lower
> Caveat: "Expected" does not mean fact. But it is understandable why investors believe this.
Yes, this is what I said. Stock markets factor in future potential (a little too much I think) and not just current performance. Hence their growing diversion from reality.
Except that Apples current performance demolishes Samsung, Apple is and has been far more profitable. Apple has never been highly valued either, it spent most of the last decade well below the markets average price to earnings ratio, the market was continually saying it didn’t think Apples earnings could grow, or even last.
It hasn’t been till the last year where Apple finally broke the market average and squeezed into a low 20 PE ratio. Fir comparison, Amazon hasn’t been below 60 in forever.
I don't see how? Samsung made $45B profit in 2017 vs $48B in 2017 for Apple. 2018- $49B Samsung vs $60B Apple. Even in worst cases Apple made 2x the profits as Samsung. Which means they should at least be worth half as much as Apple by your logic? But they are 5 times less than Apple right now in market cap.
Samsung has much lower quality profits. They have lower margins, and have much higher capital reinvestment requirements please, ie are forced to reinvest more of their profit back into their manufacturing plants. Essentially their profits are overstated.
Or if they were run by a felon in a country where accounting and governmental employees are highly motivated not to criticize said felons accounting practices. Then you might think twice about taking them at face value.
Apple is seen as the one to sustain those profits. The models for Samsung either see lower profits or discount them more steeply in their risk adjustments.
