A powerful benchmark

Why is this important?

Because the number of iPods Apple must sell, or auctions eBay must list, or packages FedEx must ship are the required business performance components for these companies. Knowing these numbers is critical to understanding the company's value.

Required business performance (RBP) is the revenue necessary to support a given stock price for a given company. It not only tells us the revenue that is necessary, it works all the way back to the RBP components to tell us at the most granular level, for example, how many iPods, desktops and portables Apple has to sell, or how many auctions eBay has to list, or how many packages FedEx has to ship to support their stock price.

The key to successful investing is to benchmark management's ability to perform in the future against the required business performance implied in the price of the stock.