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Comment by run4yourlives | Hacker News Reader

As an "outsider", the only thing I really take from this - besides seeing the prominence of YC startups - is that there certainly is a shit ton of money chasing unproven ideas.

I mean, all of these products seem on the surface to be viable entities. I suppose that alone is better than what was happening ten years ago. However the issue I have is that the degree they need to succeed just to be a positive return is sometimes bordering on the outlandish.

Groupon - a BILLION dollars? Seriously? It's news if an entire industry is worth this much, let alone a single company.

Maybe I'm just not getting it, but a lot of this stuff seems to be overvalued in the extreme.

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Valuation is not revenue is not profitability. Say your dicey tech stock has a beta of 2 & the S&P500 is expected to make 5% this year. CAPM says you'll have an expected return on capital assets of 10% given the zero risk-free rates we have now. That 10% figure in turn drives a valuation model where you plugin rosy growth probabilities & factor in the exploding populations in the emerging markets & do the all important scenario-analysis on what if just 0.1% of those folks bought my product. That spits out numbers that'll make your head spin. I've seen $1 iphone apps valued at $100 million simply cause that's how the valuation model is set up. Financial math is simply legalized delusion :)

Whether Groupon is overvalued depends on its price to earnings ratio. What is its current P/E ratio?

I disagree. P/E is just one way of valuing a company.

Regardless of their current valuation, my personal opinion is that Groupon faces serious issues regarding the long term sustainability of their business model. They have dominated an ecosystem that will eventually balance itself. I am skeptical that they can maintain their current valuation through that process.

I agree that there are other methods you can use. I thought it would be a start to bring the level of the discussion up to specifics at all.

What is Greplin's current P/E ratio?

Clearly P/E on its own is not the complete story.

A company as far along as Groupon can be valued based on earnings.

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