Market cap is kind of made up. The stock is worth what people believe it to be worth.
Profit is the number that really matters.
Profit is the number that really matters.
Theoretically that's how price targets are created by analysts. So market cap is explainable through that metric.
Profit this year and no growth vs. the same profit this year and double profits next year should lead to different market caps, and it generally does.
For a public company, it's all about return on investment, right? Market cap is the most important factor in return on investment right? Therefore, market cap is the most important measure.
Completely wrong. Hint: You are on HN. Startups obviously don't start at a large market cap.
I didn't say you should invest in companies already with a big market cap. I said market cap increasing is the ROI to investors (besides dividends, which is mostly irrelevant when investing in tech companies).
That's exactly how startups work. You invest at a cap of $50m. Its market cap increases to $1 billion. You just made 20x (provided you have liquidity).
Market cap should be equal to the expected discounted profit.