Beyond Earnings: Applying the HOLT CFROI and Economic Profit Framework

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John Wiley & Sons, Dec 11, 2017 - Business & Economics - 416 pages

Beyond Earnings is targeted at investors, financial professionals, and students who want to improve their ability to analyze financial statements, forecast cash flows, and ultimately value a company. The authors demonstrate that reported earnings are easily gamed by accounting shenanigans and reveal how commonly used profitability measures such as return on equity can be misleading.

Because earnings and P/E ratios are too unreliable for valuation, this book takes you beyond earnings and shows you how to apply the HOLT CFROI and Economic Profit framework in a step-by-step manner. A better measure of profitability results in improved capital allocation decisions and fundamental valuations.

This ground-breaking book offers the first practical in-depth discussion of how profitability and growth fade, and shows how to put this information to work right away. The authors introduce their trailblazing Fundamental Pricing Model which includes fade as an adjustable value driver and can be used to value the impact of business model disruption.

As the authors explain, the key to superior stock picking is understanding the expectations embedded in a stock’s price and having a clear view of whether the company can beat those expectations. The HOLT framework has been rigorously field tested for over 40 years by global investment professionals to help them make better stock picks and by corporate managers to understand the expectations embedded in their stock price.

Beyond Earnings is an indispensable guide for investors who want to improve their odds of outperforming the competition.

From inside the book

Contents

Financial Performance Assessment
3
Whats It Worth? Valuing the Firm
4
The Flying Trapeze of Performance Metrics
31
Accounting to Cash Flow Return on Investment
57
Total Depreciating Assets
81
Return on Invested Capital ROIC Cash Return on Gross Assets CROGA Cash Flow Return on Investment CFROI CFROI Adjustments Using Amazons ...
88
Quantifying the Value and Risk of a Companys
151
Fade Is a Value Driver
169
Risk Reward and the HOLT Discount Rate
217
The Competitive LifeCycle of Corporate
257
Question Marks Early LifeCycle
265
Essential Facts about the Competitive LifeCycle
278
Forecasting Growth
303
Evaluating Market Expectations
321
k
364
xvi
366

HOLT Economic Profit
191
Spread Fade and Growth in an EP
204

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About the author (2017)

DAVID A. HOLLAND is an independent consultant who serves as a senior advisor to Credit Suisse and is an adjunct professor at the University of Cape Town Graduate School of Business. Formerly, he was a managing director at Credit Suisse based in London. David oversaw HOLT Valuation and Analytics, the research and development arm of Credit Suisse HOLT, and ran their global Custom Solutions Group.

BRYANT A. MATTHEWS is the senior director of research for Credit Suisse HOLT. He has over 20 years of professional experience valuing stocks and helping professional investors improve their stock selection process and valuation models. His research on understanding quality and fade has been adopted by professional investors around the world and led to numerous innovations in the flagship Credit Suisse HOLT Lens application.

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