Totally correct! It depends so much on the context of the business that a simple glance at a P&L just won't cut it.
The ASX lists many relatively immature businesses who are still on their growth trajectory, which makes it much more of an art, as was mentioned by @bhavdip143 above.
However, a few things I'd look at...
- How much $ is going to corporate as opposed to actually growing the business? There are CEOs of micro-caps who are pocketing salaries that they're not earning. - What is the growth rate of revenue v expenses? - Is the business model proven - and just needs scaling - or is the offer of the company untested on the market?
Two companies that look good against these measures are Big Tin Can, and ReadCloud.
It'd be interesting to hear others' thoughts on this topic. What criteria do you look at?
