Why Valuation Isn't Value
Nov 09, 2025Valuation is a negotiated price for a story. Value is the cash a business can create over time.
Separate the number people pay from the economics the asset can produce.
The move
Valuation compresses expectations into a number. That number may be rational, emotional, strategic, or temporary.
Value is slower. It comes from future cashflows, competitive position, and the durability of returns.
The gap
A high valuation can be justified if the market is huge, margins can expand, and the company can defend its position.
It can also be a momentum story wearing finance clothes.
Use it
Translate valuation into required performance. How much revenue, margin, retention, or market share must appear? Then judge the path, not the headline number.
Company strategy, founder logic, finance, and operating moves in short case notes.