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:
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?