Who Can Evaluate A Business

Custom Text

If you’ve ever scanned through the financial news media then you’ve probably noticed that analysts rarely ever agree with each other. In fact, it’s not uncommon for two analysts to have completely different opinions about the same company.

One analyst might think that Company A is destined for success and advise people to buy as much stock as possible. Meanwhile, another analyst thinks that Company A is bound to fail in the upcoming years. They’re sounding the alarm and warning people to stay far away from Company A’s stock.

Due to this lack of consistency, it is interesting to think about who is actually able to evaluate a business. Let’s take a closer look at that.

Imagine a sports analyst

Take a moment and think about your favorite sports team. If someone were to ask you about their odds of success in the upcoming season you’d probably find tons of good things to talk about. Perhaps your team just got a brand new player, coach, or scheme. Whatever it is, you’re optimistic about their upcoming season.

However, if you’re talking with someone who supports a rival team then they will most likely be quick to counter all of your points. They might say things like “Sure, you just signed a new player but that player was never any good which is why they left their old team.” Or maybe they’ll say that your new scheme won’t work against other teams in your league.

Money Masters

They could probably name just as many reasons to be pessimistic about your team’s upcoming season as you could reasons to be optimistic.

What’s funny is that the business world is not too different.

It all depends on your viewpoint

If you own stock in a company then it probably means that you did lots of research on that company and determined that they’re going to be successful. Now, when people ask you about it, you’re going to sing the praises of that company.

However, someone else could do their own research and reach the opposite conclusion. Perhaps they looked at different information than you did or have a different strategy for evaluating a business.

A big part of the evaluation also comes down to your own risk tolerance as an investor. For example, you might look at a company that has recently gone public and determine that they’re much too risky to invest in. Meanwhile, another investor might see this company as having great potential for growth, which (for them) is well worth the risk.

So who can evaluate a business?

The honest answer to this question is…anyone! As long as you are creating a strong argument that’s backed by data and logic then there is no reason why your evaluation shouldn’t be valid.

With that said, a famous quarterback like Peyton Manning is probably much more qualified to evaluate a football team than someone who has never played. Peyton Manning understands the ins and outs of football and was a successful professional player for years.

On that same note, a successful analyst is probably more qualified to analyze a company compared to someone who has never invested before. A successful analyst has made plenty of profitable investments and might have even developed a unique strategy when making their evaluation.

We hope that you’ve found this article valuable when it comes to determining who can evaluate a business. If you’re interested in learning more, please subscribe below to get alerted of new articles as we write them!

Comments

Custom Text

SUBSCRIBE TO OUR NEWSLETTER