The Dark Side of Valuation
The dark side of valuation manifests itself less often with mature companies than with growth or declining companies, but it still shows up with surprising frequency. This section looks at some of ways in which mature-company valuations are skewed by inconsistent or unrealistic assumptions.
Growth in Mature Companies
If we categorize companies as mature based on whether they get the bulk of their value from existing assets, it would seem unlikely that growth assumptions significantly alter value at these companies. However, three common mistakes that are related to growth can be damaging to valuations:
Mistaking bottom-line growth for top-line growth: We noted that earnings growth and revenue growth can diverge at ...
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