Musings on Markets

FEBRUARY 15, 2023

During the course of the year, investors also rediscovered that the essence of business is not growing revenues or adding users, but making profits from that growth. In this post, I will focus on trend lines in profitability at companies in 2022, with the intent of addressing multiple questions.

Profit and Loss 52

Profit and Loss Investments Hurdle Rate Accounting 52

Musings on Markets

AUGUST 19, 2024

Not surprisingly, the operating metrics change as companies age, with high revenue growth accompanied by big losses (from work-in-progress business models) and large reinvestment needs (to delivery future growth) in early-stage companies to large profits and free cash flows in the mature phase to stresses on growth and margins in decline.

Corporate Finance 101

Corporate Finance Valuation Investments Finance 101

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Hurdle Rate 78

Hurdle Rate Profit and Loss Accounting Investments 78

Barry Ritholtz

FEBRUARY 21, 2023

And I love business, I love the markets, I want to go there. What sort of challenges — BUCKLEY: A couple of bear markets. BUCKLEY: We’ve had, let’s see, inflation at a 40-year high, tightest labor market of our lifetimes. We were losing market share in the critical retirement, the 401(k) business.

Leadership 111

Leadership Investments Profit and Loss Technology 111

Musings on Markets

FEBRUARY 10, 2021

What is a hurdle rate for a business? In this post, I will start by looking at the role that hurdle rates play in running a business, with the consequences of setting them too high or too low, and then look at the fundamentals that should cause hurdle rates to vary across companies. What is a hurdle rate?

Hurdle Rate 52

Hurdle Rate Currencies Investments Valuation 52

Musings on Markets

MARCH 8, 2023

The dividend principle, which is the focus of this post is built on a very simple principle, which is that if a company is unable to find investments that make returns that meet its hurdle rate thresholds, it should return cash back to the owners in that business.

Hurdle Rate 96

Hurdle Rate Corporate Finance Investments Finance 96

Musings on Markets

JANUARY 5, 2024

Thus, looking at only the companies in the S&P 500 may give you more reliable data, with fewer missing observations, but your results will reflect what large market cap companies in any sector or industry do, rather than what is typical for that industry.

Valuation 102

Valuation Financial Analysis Analyzing Data Profit and Loss 102