Discussion about profits vs marketcap

I have been playing with python and created scatter plot graph of gross profits, gross margin and free cashflow with market cap and it’s pretty wild. It’s normally pretty well bunched up and appears to be in a straight line, like bigger market cap, bigger profits, cashflow, margins, but there are a lot of extreme values. So my questions are

1-Can someone give me a more complex explanation about the relation between gross profits, gross margins and free cashflow and market cap? (I have read the definitions and such, i was more interested in more nuanced explanation)

I have those definition:
-Marketcap is # of stocks * price of stocks

-free cashflow(A company’s ability to create value for shareholders is fundamentally determined by its ability to generate positive cash flows)

-gross margins(the amount of money a company retains after incurring the direct costs associated with producing the goods it sells)

-gross profits (Gross profit is the profit a company makes after deducting the costs associated with making and selling its products)

2-If a company has a small market cap, but big profits, isn’t that a big sign that the stock price will go up? And inversely, if a company has negative profits, wouldn’t that be a sign that the stock price will fall?

I think you are doing fine, Holonoid.

Small cap companies have the problem that if they have a good idea, competitors, especially big companies, can easily copy the idea.

Warren Buffett likes to talk about the moat that protects the company from competitors. Patents can be an excellent defense. There can be others.

I suggest looking into the moat quality during your due diligence.

With a good moat successful small caps are likely to be acquired. Usually at a nice profit.

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