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So how do you value a company that doesn’t have any current profits? And how do you estimate what it’s going to be worth in 3, 4, 5 years? It’s got to be one of the most valuable skills you can have as an investor.

In this video, I’m going to show how I begin my research on a potential investment, and we’ll use Peloton as an example.

Larry He: Hi Dave, really enjoy watching your video. could you create a video to focus on how you valuate an unprofitable company? In the early days of Amazon, Tesla etc, they lost money year after year, how do you valuate them in 2, 3 and 5 years out, what valuation model do you use and what metric will you look into? could you share some books on this area? thanks for your time and looking forward to your next video.

Jan Jansen: Episode Idea: Although Tesla is an amazing example, I am also curious at how you look at companies that are at an earlier stage. Personally I have been looking at Peloton and I see a lot of similarities with an early Tesla. They offer the whole product and are disrupting an industry. Their product design, UX, NPS, CX and retention are great, and there's plenty of room for the network effect. Would love to hear your perspective on this, or any other company that's at a similar stage.

1. Get overview of business

2. Look for core advantage. Why is product superior and how will they defend it over time/

3. Find their business model. How are they making money?

4. Examine the numbers. Revenue (units sold x ASP), margins, expenses.

5. Make own valuation projections going forward with visibility.

6. Compare future market cap with current market cap

7. See if they have exceptional CEO

8. Look at what product owners are saying

9. Look at competition

10. Always go back to the key question
So what is Peleton’s superior product? How will they defend it? Can they keep up the growth? And the margins? Can they compete if Apple enters the market?

Disclaimer: All content on this channel is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. No guarantee is given regarding the accuracy of information on this channel. Author is long TSLA at time of original video publish date.

Tags: Tesla, TSLA, Elon Musk, Model 3, Model Y, Cybertruck, Investing