Rendered at 09:05:09 GMT+0000 (Coordinated Universal Time) with Cloudflare Workers.
pinkmuffinere 7 hours ago [-]
From [1]:
> A higher RG value indicates a larger gap between market valuation and the estimated fundamental base — meaning the market is pricing the company at a significant multiple of what the fundamentals alone would support.
A lower RG value suggests that the market price is closer to being covered by the fundamental base.
This is dumb. They’ve decided that their estimate of the true value is the correct one, and then calculate the difference from that. But of course, the fundamental issue is everyone has a different estimate. There’s no reason to believe their estimate is better than anyone else’s
None. The point is not Tesla specifically. Tesla is just a convenient stress case because expectations, narrative, and fundamentals are unusually far apart.
lazide 7 hours ago [-]
They’re just using the typical historic valuation based on fundamentals yes?
pinkmuffinere 7 hours ago [-]
They define a new metric that they call the “fundamental base”. It includes value of assets, trailing revenue, goodwill, and likely more. They claim in a couple places that it is not intended as a valuation, although I think the main way it would be useful is it if is a valuation. It also claims to be an “estimate” — but an estimate of what?
Somebody who seriously works in finance will have a more enlightened view than me, but it seems to me that they defined a heuristic by combining existing heuristics. I don’t think that’s necessarily wrong, but there’s also no reason I can see that it should be right. And because it’s complicated, i think it obscures some of the confusing bits that you’d directly face if you used traditional metrics
hstrex 1 hours ago [-]
[flagged]
laughing_man 3 hours ago [-]
For mature companies in mature markets, I guess. It's kind of odd to see this sort of thing on a site so closely associated with startups.
hstrex 1 hours ago [-]
Agreed. This is not useful for seed-stage startups.
It becomes interesting for public companies that already have mature-company fundamentals, but are still priced on a startup-like narrative. Then you can at least make the implied future assumptions explicit.
t0mpr1c3 9 hours ago [-]
No prize for guessing the most unreal stock in Nasdaq.
> A higher RG value indicates a larger gap between market valuation and the estimated fundamental base — meaning the market is pricing the company at a significant multiple of what the fundamentals alone would support. A lower RG value suggests that the market price is closer to being covered by the fundamental base.
This is dumb. They’ve decided that their estimate of the true value is the correct one, and then calculate the difference from that. But of course, the fundamental issue is everyone has a different estimate. There’s no reason to believe their estimate is better than anyone else’s
[1] https://hstre.github.io/Reality-Gap/methodology/
Somebody who seriously works in finance will have a more enlightened view than me, but it seems to me that they defined a heuristic by combining existing heuristics. I don’t think that’s necessarily wrong, but there’s also no reason I can see that it should be right. And because it’s complicated, i think it obscures some of the confusing bits that you’d directly face if you used traditional metrics
It becomes interesting for public companies that already have mature-company fundamentals, but are still priced on a startup-like narrative. Then you can at least make the implied future assumptions explicit.