www.head-fi.org worth $7,373,520

Is it a job?

Considering the limited release headphones that was released here in Headfi. Like the HF2 small amount goes to headfi for each headphone and check out the sponsors , click ads, meets.. Everything is funded one big happy family.

Until someone brings up cables.

Fortunately I happen to be pursuing an MS in Finance and am a complete finance nerd. Let me explain how they can get that number. :)

I reversed engineered the assumptions they are using through shear guess and check (it was my second guess, lol). You can get a value of $7,373,520 by assuming a net profit margin of 70%, a growth rate of 0%, and a required rate of return of 10% per year. 

Here's how they could calculate it: Assume HeadFi is making $87,780 in sales per month. 

Multiply that number by 12 to get annual sales of $1,053,360.

Now, HeadFi has expenses it needs to pay from that revenue. Through shear guessing I found they could be assuming that 70% of revenue becomes profit. 

So, now you have profits equal to 70% of $1,053,360 ...or $737,352 per year (and expenses of roughly $300,000 per year). 

Now...how much will an investor pay for the 

$737,352 per year HeadFi allegedly generates? If the investor requires a return of 10% per year - and assumes 0% earnings growth per year - the investor will pay $737,352/0.10....which equals the magic $7,373,520. Alternatively, you can the increase the required return up to 11% and earnings growth up to 1% and get the same answer (or [12%, 2%], [13%, 3%]....basically anything that makes the denominator equal to 0.1....search for the Gordon Growth Formula if you really want to know).

Keep in mind that a model is only as good as the assumptions/inputs. I'm oversimplifying due to limited information (and posting space, lol). I'm very skeptical that HeadFi makes $87,780 in sales per month. Also, net margins of 70% seems aggressive and earnings growth of 0% seems conservative. Similarly, I'd think an investor would require returns MUCH higher than 10% per year to compensate for the riskiness of HeadFi's advertisement model. If I had to guess I think $7 million is a bit excessive.

Hope that helps!

EDIT: Okay, their methodology is crack. It values Rotten Tomatoes at $3 million. Hmm....so Jude can sell HeadFi, buy Rotten Tomatoes, and still have $4 million leftover? I'd don't think so. Also it values Amazon.com at $151 million...when the stock market currently has it trading at $53 BILLION. It lists Google.com at $2 billion when the market has it at $146 billion.

Whoa whoa whoa, I think that some random website is a more accurate gauge of worth than the stodgy old stock market.

I think they're calculating how much money our poor wallets are cumulatively missing.