Earnings Matter (Here in the Real World)

Awesome article over on Quartz re: Snapchat’s recent $19bn valuation.  To be clear, that’s $19bn on basically zero revenue and zero profit.  (An infinity: PE ratio if you are the stickler for details).

Check out this chart they posted:

market-cap-revenue-net-profit_chartbuilder2

And THIS is why we focus on earnings.  How on earth can you, a person existing in the real world, seeking to extract dividends from an earnings stream, care about these valuation metrics?

Here we have ConEd, an established and staid utility, generating $1.1bn earnings on  $12.4bn revenue valued at just shy of $19bn.  A tried and true business model.  Locked in customer base.  Steady cash flows.  Has erected difficult barriers to entry for peers.

And we compare that to a company that does…. what?  Generated a lot of page views and eyeballs, but can’t monetize.

Back here in the real world, we focus on earnings.  Right?

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