Answer 8 |
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Read more on the length of the high growth period |
Since it is not growth that creates value but excess returns, this question can really be framed as: "How long will excess returns continue?" Since excess returns are conditioned on the existence of barriers of entry, the larger and more sustainable the barriers to entry in a business, the longer the high growth/excess return period can last. There are other pragmatic considerations. As firms get larger and acquire larger market shares, there is a limit on how much longer they can continue to grow at rates higher than the economy. Hence, a firm might find its growth tapering off even before the excess returns go to zero. |
