Knowing the difference between the two
A company can produce one of the greatest products or offer fantastic services in the market that majority would use in their every day lives.
But…
That is not a good enough reason to warrant an investment in that company just because majority use those products.
Like any investment, one has to exercise extra due diligence beyond a company’s products or services.
Examine valuation metrics such as EV/EBITDA, P/B ratios, P/E ratios, P/S ratios and many other indicators.
Develop an adequate understanding about a company’s income statements and balance sheets are equally essential to understand the direction of the company and its financial strength. Profitability, debt levels, assets and liabilities and free cash flow are extremely important to any company.
TLDR: You can’t justify an investment in a company 100% based on its products or services no matter how great or widely used.
But…
That is not a good enough reason to warrant an investment in that company just because majority use those products.
Like any investment, one has to exercise extra due diligence beyond a company’s products or services.
Examine valuation metrics such as EV/EBITDA, P/B ratios, P/E ratios, P/S ratios and many other indicators.
Develop an adequate understanding about a company’s income statements and balance sheets are equally essential to understand the direction of the company and its financial strength. Profitability, debt levels, assets and liabilities and free cash flow are extremely important to any company.
TLDR: You can’t justify an investment in a company 100% based on its products or services no matter how great or widely used.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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Tonyten88 : Indeed! It's better do your DD before investing