To success in investment, we need to have the ability to measure the value of something and more importantly pay a lot less.
A lot of investment books may teach us how to compute the value of a company based on the sum of all of the earnings we expect to collect from that business over its lifetime. However, this is only based on guesses – something we expect on the business of the company. However, nobody really know the future of anything, not to mentione 10 years, 20 years or 30 years from now. Small changes in the calculation of future earnings will result in big different estimation of the value of a company. As such, valuation of a company only based on current earning and future expected earnings may not be accurate and meaningful!
As an investor looking for value, we may need more methods in valuing a company.