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Microcap & Penny Stocks : WINR-Secure Banking to Global Internet Gaming & E-Commerce
WINR 0.00010000.0%Nov 5 1:20 PM EST
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To: swedelo who wrote (3653)1/4/1999 12:19:00 PM
From: Mags  Read Replies (1) of 6545
 
Sweldo, I have to respectfully disagree regarding your comment about revenue rather than earnings as being the driver for current valuations. My argument is subtle but very important to the valuation of any risky asset. There are only two things that matter when valuing an asset: fist, what are the expected cash flows to the owner of that asset, and two, how risky are those cash flows.

So even for the high flying internet stocks, earnings, or more precisely expected earnings or cash flows, not revenues are the important metrics. Revenue growth is so imporant right now for internet stocks because investors are betting that the growth in revenues will turn into earnings at some point down the road. So it always goes back to earnings or the expectations of earnings going forward. So the market is very worried about earnings...that is expected earnings, it always has been and it always will be.

The difficulty that people are having right now valuing these internet stocks is that the growth expectations are just so enormous relative to what people are used to seeing in traditional industries. As a side note, earnings can always be manipulated through various accounting practices so cash flow is the best measure to use.
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