• humanspiral@lemmy.ca
    link
    fedilink
    arrow-up
    1
    ·
    1 day ago

    It’s not a useful metric because some companies have high margins (perfume, advertising, software) and some have low margins (grocery stores, space launches), and mandatory huge capital/cash reinvestment (AI, space launches). The reason to use a multiple to revenue is because of unprofitability. But all stock price is a function of profit and expected profit growth rate… usually.