The Real Reason You’re Wasting Time Reading Most Stock Analyses (step-by-step example)
Even when numbers look strong—like Harvia’s projected 12% annual return—they’re built on illusions of predictability that no financial model can fix.
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Let’s begin.
EXECUTIVE SUMMARY
1️⃣ Most stock analyses are flawed because they rely on financial models built on false assumptions, producing precise numbers with no predictive power if the company’s future is unclear.
2️⃣ Harvia trades at €49.7 with a forward P/E of 30.6 and an expected EPS growth of 18%; combined with a 1.6% dividend, the model suggests ~12% annual return even with a P/E drop to 15.
3️⃣ Harvia’s moat includes vertical integration, 70+ years of experience, global distribution across 90 countries, and product breadth—but these advantages are replicable by larger tech or smart home entrants.
4️⃣ Key threats include smart tech disruption, e-commerce undercutting pricing, and digitally native competitorstargeting niche segments like infrared or IoT sauna controls faster than Harvia can.
5️⃣ Without long-term business predictability, valuation models are worthless—as shown in volatile industries like semiconductors, where even a dominant player like Nvidia defied all forecasts.
Now, let’s step into the full article—where every detail comes together to reveal the complete picture. 👇🏻
What I want to make absolutely clear in this article is that nearly all company analyses you find online—especially those about publicly traded stocks—are wrong.
Not just slightly off. Fundamentally flawed.
They rely on financial models that are built on completely wrong assumptions. These models are designed to produce a numerical output, a “valuation,” that appears precise, rational, and data-driven. But that number is almost always based on false premises. And so the entire conclusion, no matter how polished the spreadsheet or how complex the math, is worthless.
Let’s go deeper.
The real problem in investment analysis isn’t in how you calculate the value of a company—it’s in whether you can actually understand the business deeply enough to predict its future. If you can’t, then any valuation model is pure fiction.
Let me show you what I mean with a concrete example.
Harvia: A Case Study in Misleading Precision
Let’s take Harvia, a Finnish company that may indeed be attractive in some ways (and one I’ll probably write more about in the future). But for now, I want to use it as a practical example—not to judge whether it’s a good investment, but to show how even “smart” financial models collapse without a clear, justified view of the future.
What Harvia Does
Harvia Oyj specializes in sauna and spa products. It produces everything related to the sauna experience:
• Electric and wood-burning heaters
• Ready-made sauna rooms (traditional, infrared, steam, or hybrid)
• Hot tubs, steam rooms, spa modules
• Accessories (sauna stones, buckets, ladles, scents, lighting, textiles)
• Smart control units and IoT connectivity
• Maintenance, installation, and repair services
It operates globally, selling through a wide dealer and distributor network, with strong market presence in Europe, North America, Russia, and other international markets.
It’s not just a sauna heater company. It’s a global brand for the full sauna experience.
⸻
Harvia’s Competitive Advantages
Harvia does have real competitive strengths, and they’re worth highlighting:
1. Industry Leadership and Vertical Integration
Harvia has over 70 years of experience in the sauna business. It’s the global leader in electric sauna heaters with ~20% market share in heaters/components and ~5% in the global sauna and spa market.
What sets it apart is integration: Harvia designs full sauna systems where everything works together—heaters, control panels, lighting, and accessories. Most competitors only produce isolated parts. Harvia owns the whole experience.
2. Global Manufacturing and Cost Efficiency
Harvia owns production facilities in Finland, Germany, Romania, Italy, Estonia, China, and the U.S. This allows it to localize production (especially in the U.S., avoiding tariffs), achieve economies of scale, and maintain tight control over supply chains and quality.
3. Brand Strength and Regulatory Moat
Harvia’s brands (Harvia, EOS, Almost Heaven, ThermaSol, Kirami) are widely recognized. Its products meet strict international certifications (CE, UL, RoHS, energy standards), which locks out many low-cost competitors that can’t meet those standards.
4. Distribution Dominance
Its products are sold in around 90 countries through wholesale, DIY chains, online channels, and B2B integrators. This gives Harvia what’s called a channel advantage—it’s already present where customers are buying.
5. Innovation and Sustainability
In 2024, Harvia launched the world’s first solar-powered outdoor electric sauna. Through the ThermaSol acquisition, it expanded into digital steam and shower tech, now offering smart, connected sauna systems protected by know-how, IP, and ecosystem integration.
These advantages are real. But here’s the key: They’re not absolute.
⸻
Why Valuation Models Often Lie—Even When They Look Sophisticated
Let’s look at the numbers.
As of now, Harvia trades at €49.7 per share, with a forward P/E of 30.6.
Now, most investors obsess over that number. “Is it too expensive? What if it drops to 28 or 27?”
But that’s the wrong focus. Those slight changes make no difference to the real investment outcome.
Instead, let’s examine the long-term assumptions behind the valuation.
Analysts expect 18% annual EPS growth over the next decade. Not next quarter. Not even next year. We’re talking 10-year growth expectations. Add to that a 1.6% dividend yield, and the model starts to look attractive.
But let’s now stress-test this scenario.
What happens if Harvia’s P/E multiple drops from 30 to 15 over 10 years?
The typical view is: “That’s a 50% loss.”
Wrong. The real loss is 100% of your expected gain.
If earnings double over 10 years (+100%) but the P/E is halved, your share price stays flat.
No gain. No return. Zero.
This is critical:
If P/E compresses while earnings grow, you can end up with nothing.
Now do the math:
• EPS growth: +18% per year
• Dividend yield: +1.6%
• P/E multiple compression: **~ -7% annual impact** (because halving over 10 years cancels out compound growth)
Even in this “worst-case” model, your total return is ~12% per year. Not bad at all.
But here’s the catch:
That 18% EPS growthis not a fact. It’s a hope, built on very fragile ground.
⸻
The Growth Assumption Is the Real Risk
You could argue, “But Harvia is the market leader. Surely growth will follow.”
Sure—but remember: the global sauna market is only projected to grow 5% per year. Harvia may gain market share, yes, but you can’t know how much profit that will generate.
And here’s the real truth:
Most so-called competitive advantages are not real moats.
And without a real moat, long-term growth is unpredictable.
Let me explain.
Some Advantages Are Truly Durable…
Companies like Coca-Cola have a taste profile that can’t be improved—you can’t compete on flavor. Meta (Facebook/Instagram) has network effects that make it impossible to replace.
TikTok, for example, takes up user time—but it doesn’t replace the function of Instagram (social updates from people you know). Different job, different use case.
That’s true defensibility.
…But Harvia’s Advantage Isn’t That Deep
Harvia’s edge is strong—but not unbeatable. There’s nothing materially stopping a smart, well-funded competitor from attacking its position.
And if that happens, your EPS growth assumptions go out the window.
⸻
The Risks No Financial Model Can Capture
Even if a model shows good returns, there are real, uncapturable risks that could wipe them out.
1. Big Tech and Smart Home Giants Enter the Sauna Market
New entrants aren’t just niche players—they could be tech giants, fitness brands, HVAC firms, or consumer electronics companies. With billions in capital and speed on their side, they could buy smaller sauna firms, build smart systems, flood digital ads, and dominate distribution.
2. Harvia Could Fall Behind in Smart Tech
Consumers expect digital convenience everywhere—lighting, entertainment, heating. That expectation is now moving into wellness.
Harvia has made progress (MyHarvia app, ThermaSol), but tech-native competitors can move much faster. Some could dominate narrow niches—like smart control panels or ultra-efficient infrared systems—and build loyalty without needing Harvia’s scale.
3. E-Commerce Erodes Distribution and Pricing Power
Harvia’s strength in showrooms and dealer networks is being challenged by online-first rivals. Platforms like Amazon, Alibaba, and DTC websites allow low-cost competitors to bypass traditional barriers.
In markets like the U.S. or Southeast Asia, brand awareness is weaker, and cheap alternatives can confuse customers. Even if they don’t match Harvia in safety or durability, they force price pressure, eroding Harvia’s margins.
⸻
Final Insight: If You Can’t Predict the Future, You Can’t Do Financial Analysis
So what’s the core message here?
Don’t trust analyses that rely on financial models without understanding the underlying business.
And above all:
If you can’t predict the future of a company, you can’t evaluate it.
Every financial model depends on having at least a rough idea of how a business—and its industry—will evolve over the next 10 years.
But most industries, and most companies, are not predictableover that time span.
Think of semiconductors. Financial models in that sector are almost laughable. Nobody knows what the next two years will look like, let alone 10. Look at Nvidia: its recent success shocked everyone—not because people were wrong, but because the industry is too dynamic to model.
⸻
Conclusion: Rethink How You Read Investment Analyses
So next time you read a stock analysis online, pause.
Ask yourself:
• Can I actually understand the business?
• Are its competitive advantages structural, or easily attacked?
• Is the future predictable, or are we just guessing?
If the answer is “we’re guessing,” then no financial model can save you.
Think first. Then analyze. Only when you can reasonably predict the futureof a company does it make sense to assign it a value.
And that’s exactly what most people writing stock analyses online have never understood.
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what's the difference between guessing and predicting?
But in truth no one can predict the future does that mean no one can do financial analysis?