Yes, but P/L is separate from WACC. WACC is the best available tool out there to see if a business is generating value based on ROIC. It’s also the best to estimate required return (though I use a personal rate).
Appreciate it Michael! Please feel free to respond back with feedback. I’m always looking to improve.
I have a back-of-the-napkin analysis on my website here as well if you’d like to learn some more on the qualitative side. I write about them frequently, so if you’d search up “Amazon” in the search bar on the website there should be a lot of helpful articles for you.
I’m also very happy to answer some questions on Amazon if you’re curious after reading! :)
Do not trust WACC.
Wacc is greatly dependent on Beta.
Beta is dependent on daily stock quoted price fluctuation, aka volatility.
It’s more of a guideline (the ROIC to WACC spread) to see if the business is at least returning positively.
All Costs (all cogs, finance cost, admin expenses, etc) have already been deducted in P/L.
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P/L comes clean.
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We don't need wacc.
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Wacc is a financial terminology gimmick to confuse and trick the investors.
Yes, but P/L is separate from WACC. WACC is the best available tool out there to see if a business is generating value based on ROIC. It’s also the best to estimate required return (though I use a personal rate).
Munger said Equity is not a Cost, there is no Cost of Equity.
THE LARGEST part of Wacc is made up of Cost of Equity.
Buffett and Munger use 30Y treasury bond yield, which is slightly less than 5% now.
A lot of info, saved it to look into it deeply later and it’s perfect because I’m looking at Amazon to invest as well!
Appreciate it Michael! Please feel free to respond back with feedback. I’m always looking to improve.
I have a back-of-the-napkin analysis on my website here as well if you’d like to learn some more on the qualitative side. I write about them frequently, so if you’d search up “Amazon” in the search bar on the website there should be a lot of helpful articles for you.
I’m also very happy to answer some questions on Amazon if you’re curious after reading! :)
Wow! Thank you I really appreciate it! I just subscribed to your blog! I will definitely take you up on your offer and ask some questions!
I also started writing about all things money, and would really appreciate it if you could check out my articles and give me feedback as well!
I’d be happy to help Michael! And thanks for the subscription. Means a lot.
I’ll definitely give a read through your articles here!
Really strong article, Jacob!
Thank you Felix. Much appreciated.