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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: firstflight who wrote (91330)	1/6/2001 4:10:28 AM
From: ratan lal	Respond to of 152472

Isn't the theory that a stock is worth the current discounted value of its future earnings stream? But unless the company is unlikely to be around after 2 years, why cut the earnings off at that point. First of all, at any point in time, a stock is worth what someone is willing to pay for it at that point in time. If you were paying a price taking into account the discounted value of ALL of its "Potential" future earnings, then 1. How would you profit from it 2. Why would you take ther risk of the 'potential' profits not being realized. Obviously the amount you pay for future earnings will depend on the consistency with which you think that income stream will continue and even grow. So for a company with uncertain earnings you will pay far less than one with a proven track record. If you tkae the example of buying the whole company, at some point in time the profits generated have to equal the amount you paid for the company and from that point on you will be truly making a profit. The question is how many years would you go where your profits just go to make payments on your prinicpal? look at it another way. Suppose you bought the company with zero money down. Now from the profits you have to pay off the purchase price plus interest. Also assume that you dont get any salary at all. Now how many years would you be willing to work without a salary to pay off the cost of ownership. Would you be willing to go for 10 years? In essence that is what you would be doing. You would have no profits (all money goes to pay off principal) till you pay off your principal and interest (even if you paid it out of pocket).