Post #17614 by rnam on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)

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Prof. Damodaran has developed a model to estimate the breakeven revenue required to justify the current market cap of trillion dollar companies. The revenue growth rate required for the next 5 years is lowest for Aramco at 0.59% and BRK at 5.6%. It is highest for Tesla at 86%. Nvidia is at 26% and Apple 20%.

I will offer a simple model to reverse engineer from any given market capitalization, the revenues and profitability thresholds you have to meet, and allow you to come to your own conclusions.

The mechanics of the breakeven revenue process may make it seem like managers are bystanders in the process and that investing can be on autopilot, but they are not. In fact, when market capitalizations rise, and breakeven revenues run well ahead of current revenues, I would argue that management matters more than ever. Going back to the breakeven revenues that we computed for the twelve largest market cap companies in the world, I would make the case that management matters much less (if at all) in Aramco and Berkshire Hathway, where breakeven revenues are close to current revenues, and the investments needed to deliver those revenues have already been made, that at the companies that still have steep climbs ahead of them to get to breakeven revenues.

https://aswathdamodaran.substack.com/p/trillion-do...

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