What does the valuation of a company mean, exactly?
What is it based on and how is its "correct" value calculated?
For example, a valuation of $1 million for a company that has had $50k in profits the past year is usually seen as quite ridiculous (or at least it is, as far as I can tell from watching Shark Tank).
Yet if the profits were $500k instead, then the valuation would be more likely to be seen as reasonable.
So how do you tell what the "correct", optimal valuation for a company is?
What makes a valuation of $1 million "good" for a company with $500k in profits, but bad for a company with $50k in profits?