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

The article introduces the authors’ “ Imagination Premium™” metric which assesses the confidence of the investing community in a business’ growth strategy.

The article explains how the Imagination Premium is calculated and applies it to several cases--Amazon, Tesla and Buffalo Wild Wings.

Amazon’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.

Sky-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.

By applying the Imagination Premium concept to successful and problematic cases the authors illustrate the risks and advantages of a bold growth-before-profits strategy.