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Do you understand what "valuation" means?

It is the expectation of future profits by investors.

When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company.

It's fairly common for small, young companies to grow by multiple-hundred percent per year.




> Do you understand what "valuation" means?

More than most people.

> It is the expectation of future profits by investors.

No, that is one component.

> When a company is small but growing quickly is is very reasonable for investors to expect profits to increase more quickly than at a mature company.

Not without more information.

> It's fairly common for small, young companies to grow by multiple-hundred percent per year.

Considering the failure rate of young companies, you have a strange definition of the word "common".


Considering the failure rate of young companies, you have a strange definition of the word "common".

Even taking failures into account, multiple-hundred percent per year is still probably pretty common. If a company doubles its revenue in a year that's a 100% increase, and that's not exactly uncommon.

Strangely, investors attempt to pick the winners, not invest in random small companies.

They look at metrics like growth rate, earnings, and cost of customer acquisition to decide what to invest in.




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