Does Wall Street buy your growth story? For how long?

Does Wall Street buy your growth story? For how long? PurposeThe article introduces the authors’ “ Imagination Premium™” metric which assesses the confidence of the investing community in a business’ growth strategy.Design/methodology/approachThe article explains how the Imagination Premium is calculated and applies it to several cases--Amazon, Tesla and Buffalo Wild Wings.FindingsAmazon’s implied value of growth was nearly four times its value from operations, a result completely consistent with its “profits are optional” motto. Amazon is a prototypical example of a company that is built to thrive in the ‘transient advantage economy.Practical implicationsSky-high expectations for growth can be dashed by external events over which businesses have little control as Tesla found out. Unless a business can show, as Amazon has historically done, that it can turn expectations into gold-spun reality, lofty investor expectations can become a liability.Originality/valueBy applying the Imagination Premium concept to successful and problematic cases the authors illustrate the risks and advantages of a bold growth-before-profits strategy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Strategy & Leadership Emerald Publishing

Does Wall Street buy your growth story? For how long?

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1087-8572
D.O.I.
10.1108/SL-01-2018-0005
Publisher site
See Article on Publisher Site

Abstract

PurposeThe article introduces the authors’ “ Imagination Premium™” metric which assesses the confidence of the investing community in a business’ growth strategy.Design/methodology/approachThe article explains how the Imagination Premium is calculated and applies it to several cases--Amazon, Tesla and Buffalo Wild Wings.FindingsAmazon’s implied value of growth was nearly four times its value from operations, a result completely consistent with its “profits are optional” motto. Amazon is a prototypical example of a company that is built to thrive in the ‘transient advantage economy.Practical implicationsSky-high expectations for growth can be dashed by external events over which businesses have little control as Tesla found out. Unless a business can show, as Amazon has historically done, that it can turn expectations into gold-spun reality, lofty investor expectations can become a liability.Originality/valueBy applying the Imagination Premium concept to successful and problematic cases the authors illustrate the risks and advantages of a bold growth-before-profits strategy.

Journal

Strategy & LeadershipEmerald Publishing

Published: Mar 19, 2018

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