I understand in a startup that has not created revenue yet, if the “future” is predicted to be bad for the company, the value of the company only would drastically go down (for the only worth was on future hopes). However, in an established company that has made a lot of money in the past, shouldn’t all that money have been added to the value?
Imagine you were a real partner with Netflix or a similar company, and collected your share every year. You would have made lots of money in the past.
Imagine three companies you might buy shares in. Remember - shares represent a % of ownership of the company, and the net profits it will produce in the future.
Company A is just a closet full of cash - let's say $10M.
Company B is a movie studio that just spent all of its money, $10M, to produce a film that is about to release to theaters.
Company C is a movie studio that just spent half of its money to produce a film, and also has $5M of cash earned from its last film.
You know exactly what Company A is worth ($10M). If Company B's release goes well, it might be worth exceptionally more than $10M, or it might be a flop worth nothing. Company C has some known value (net assets in cash), and some unknown value (the yet-to-be-released film).
How Company B & C are valued, is based on the market's expectation of how much it will earn in the future. For a company like Netflix, its share price implies an expectation that future earnings will exceed its current net assets - so if it stops earning new money, the share price would drop to reflect something closer to what it has now in the bank.
*Your misunderstanding is from the fact that the share price today is not based on current asset value, it is based on what future earnings are expected, and therefore any drop in expected earnings would decrease current share price, which is already elevated to account for that.
{Edited to add clarification per a later question you asked, here: (DCF valuation) Will the cashflows (per share) of company XYZ, every year in the future (2023...) be added up and go into its shares price every yr
Note that in theory, some 'excess' assets of a company, not involved in its ongoing operations [like a vacant piece of land it no longer uses, or excess cash not needed to ensure things get paid on time], might need to be added to its estimated value, above its future estimated cashflows. However for the most part, a simple rule of thumb would be to assume a company needs all of its assets in order to make that future value. Simple example - Netflix can't earn subscription revenue from people who only want to watch Stranger Things, and also make $100M by selling it to someone else - so if you tried to add the potential 'selling price' of Stranger Things to your estimate of NFLX's future cashflows, you would end up double-counting its impact.}
To drive this point home further: You think that because Netflix was profitable in the past, it should be worth a lot even if its future earnings are in doubt. Netflix is not a great company to make this point:
Total earnings over the past 5 years per https://ycharts.com/companies/NFLX/net_income is about $15B. Current market cap is about $123B. That current market cap is almost entirely based on the market's idea that future earnings will occur. Netflix's current assets are about 45B, and it has debt of 28B, so less than $20B of net assets to attribute to shareholders [who have invested something like $30B to date, per my brief look at the financials].
If you're buying in today, you don't gain anything from past profits. You only stand to gain from future profits. Therefore past performance should have no effect on the price you're willing to buy for, except to the extent that you believe that past performance will be indicative of future performance.
If a company no longer makes any money then it could close down and return the money to shareholders but if it doesn't and keeps running then it will eventually run out of money as it pays employees and other running costs.
If you had shares in some profitable company then maybe you've been paid dividends and had some value from those shares already. Even if the company isn't predicted to make any more money then those shares probably still do have some value, the Net Asset Value (NAV) of the company.
Some companies do have a share price below the NAV of the company, and they do come under pressure in that case from their existing shareholders to either break the company into smaller and likely more profitable parts, cease some or all of their unprofitable operations and/or return money to those same shareholders. After all those shareholders could sell their shares and invest that money elsewhere.
On the other hand, if you had shares in a company that you thought would make a lot of money in the future, wouldn't you want to own those shares much more than a company that had the same NAV but that you didn't expect to make any more money. The latter company is worth its NAV, the former is surely worth more than that. That's why prospective shareholders pay more for companies that are growing than companies that are static or declining.
Having a history of having made money is not worthless, but how much it is worth is complex and depends upon a variety of factors, including industry, leadership, the market the company serves and market trends.
That said, for most people looking at most companies, having been profitable in the past isn’t an asset. The company can’t sell it and probably can’t borrow against it. Shareholders can’t expect to profit from it if the company runs into problems and has to go out of business.
So, for most companies past profits only add to their value if those profits were reinvested into the company by purchasing assets that have value. To the extent that Netflix has done this (buying the rights to old movies) their value has gone up, but profits that were distributed to shareholders are gone.
Maybe, maybe not.
Consider if you are an automaker who builds internal combustion engines in-house. You earned a lot of money by making ICE vehicles, and invested the money you obtained into ... more and more equipment for making engines and ICE vehicles. Then all of a sudden, electric cars gain traction. Your investments into all of that equipment just are worthless since nobody buys dinosaur-fueled cars anymore.
Now, you could also be an automaker that has earned a lot of money by making ICE vehicles, and paid that dividend to shareholders without investing into growth. Whatever little you own is now also worthless, but your investors have earned huge dividends in the past. That's the money of your investors, not the money of the company. So the investors are in a better situation, but that doesn't affect the company valuation at all.
Now, there's also a third possibility. Maybe you avoided paying dividend to investors, instead hoarding huge amounts of cash. The production equipment for ICE vehicles is now worthless, but at least that cash has value.
So how those past profits have been used matters a lot. Those past profits show in the balance sheet of the company, if the company didn't already pay those as dividends to shareholders.
Outdated equipment in balance sheet has no value, still useful equipment has some value, but cash always has full value.
So, investors only are interested in future performance and maybe cash in some cases. However, interest in cash is usually not all that big, investors might not value 1 billion USD cash as 1 billion USD value, since a company hoarding excess cash is usually a very poor company (why doesn't it invest it into growth? why didn't it already pay it as dividend or as share buybacks?).
All of the equipment on balance sheet is necessary for future performance of the company, so those shouldn't be valued separately, when estimating future performance you already included those in your estimation.
