It is hard enough to pick the winners. Management are charming and seem capable, but will the business actually be capable of delivering ? But that positive decision having been made, how do we arrive at the right valuation ?
And when we compare two similar companies, or look at various companies in our portfolio, how do we square the fact that they present information so differently ? One accrues subscription revenues while another takes the present value up front; one capitalises R&D while another does not.
This creates not only different revenues but significantly different P&Ls and earnings volatility. This makes it very difficult to have a consistent way of valuing portfolio companies and assessing their likely cash needs. If only this could be done on a consistent basis, at least for our own portfolio companies…
Well, CONVENDIA can help !
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