Both investors and traders have a tendency to assess a company’s performance by referring to just a couple of metrics in the earnings report, but this rough-and-ready approach is full of pitfalls says Aswath Damodaran, Prof of Finance, Stern School of Business NYU, in his blog post yesterday.
At the outset, Damodaran makes a distinction between an investor and a trader, pointing out that he has always associated the former with value and the other with price in their approach to the markets. For a trader, it is in fact desirable that she identifies and trades the very metric that other traders follow for their market decisions. Implicitly, since their outlook is short-term, these market participants are really not...
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