Market Stage

Products go through a cycle of stages, which is also influencing company valuation. Product ideas are introduced, developed, mature, and decline. While many companies can provide substantial dividends and returns to the stockowners throughout every stage, the stage of its main product offering is important to consider for a few main reasons:

First, a product idea at an early stage often has a higher risk/reward ratio. Because the product is new, there are few competitors in the market to compete for market share. Yet these ideas are often untested in consumer markets and may fail.

Inversely, products in the later stages, such as market maturity and market decline, have very limited potential for future growth. However, a company with products in later stages can still differentiate itself from competitors and provide sustained profits and returns to its investors.