1 - Introduction

Summary

At some point, it becomes almost impossible for management to deliver on accelerating expectations without faltering, just as anyone would eventually stumble on a treadmill that keeps moving faster. McKinsey & Co., Valuation: Measuring and Managing the Value of Companies, 2020 The typical public corporation now runs on a valuation treadmill. If its stock is traded widely in public markets, it must take care to keep pace with market expectations. Whether it be through developing transformative new products or consistently meeting quarterly financial projections, a public company must continually convince investors that it will generate profits in future years just to maintain its stock price. If investors become concerned that a company’s profitability is declining, they can drastically readjust its valuation.