The Present Value of Forever

Apr 1997 //
Investing

While some observers think of stocks mainly in terms of current prices or in terms of companies’ current earnings, dividends and cash flow, we can take a different tack.  Since each share of stock entitles its owner to a fractional share of ownership of a company in perpetuity, I think it’s more realistic for us to consider companies’ results over many years.  Even though we may logically weigh companies’ current year results more heavily than in any given future year, the fact that there are so many future years to consider means that much of what we should value in stocks relates to the future.  I’d like to call the value that we place on stocks—when we view companies’ results over many years—the present value of forever