More and more of our economy revolves around information technology. A handful of tech giants have experienced unprecedented success in seizing control of large parts of our increasingly internet-dependent economy in just a few years. This trend is only going to increase.
Technology businesses can make excellent investments – many are inherently highly profitable and can scale very quickly. However, assessing the valuation of this sort of high growth business can be challenging. One of the most important and obvious determinants of valuation that seems to get less attention than it should is what the growth profile will look like. Is it likely to accelerate or decelerate and how long will it persist?