Hacker News Reader

I hope this doesn't come out the wrong way, but why isn't it as simple as that? I'm sure the Enron accountants could come up with a better valuation model, but that doesn't necessarily make it so. It's a simplistic formula, but it seems reasonable enough to me.

View on HN

Valuation is not the same thing as revenues per year. Or profit per year.

an easy example: if facebook made 15B per year with 5B in profit, they could distribute dividends of the 5B each year to stockholders. In only 3 years, your original investment would be paid back and it would be all profit (to the investor) from that point on.

Would you think that was a good deal? I would! So good that it'd get bid up on the open market way past 15B.

Reply on news.ycombinator.com