Obviously, some firms do have actual earnings. But many do not. So beware when people start saying "price to earnings" ratios aren't the best way to value firms. That's the same slippery slope that lead to disaster last time. PwC partner Ian Coleman says "value per user" is a reasonable way to value firms. Watch out. That's bubble talk.
Monday, May 23, 2011
Watch Out When Valuations Aren't Based on Earnings
There isn't a social media bubble, a PwC consultant says. But watch out when experts start using metrics other than those based on earnings. That's what happened during the 1999 technology bubble as well. People started inventing metrics not based on earnings, because there were no earnings.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
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