33.3
3. Many of you bought Internet stocks that don't even have any profits yet. However, these companies are worth a LOT of money. How can a company be worth anything if it has never had any profits? (5)
The stock market does not look backward--it looks as far into the future as possible. Thus, the value of a stock contains not only the current profits, but the potential for future profits and growth. Internet stocks can be worth a lot because their business is expected to grow a lot in the future, so future cash flows are high even if current ones are low.