Beyond Earnings: Applying the HOLT CFROI and Economic Profit FrameworkBeyond 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
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... POINTS A REVIEW OF CONVENTIONAL VALUATION APPROACHES HOLT APPROACH TO FCFF VALUATION NOTES 5 QUANTIFYING THE VALUE AND RISK OF A COMPANY'S CAP KEY LEARNING POINTS INTRODUCTION THE WORST INVESTMENT IEVER MADE QUANTIFYING THE MAGNITUDE AND.
... FCFF, NOPAT, and investment. EXHIBIT 4.4 Financial forecast and FCFF valuation of Air Liquide. The market enterprise value was circa €44bn as of December 31, 2014, and December 31, 2015. EXHIBIT 4.5 Flowchart showing the calculation of ...
... calculation of HOLT EP. EXHIBIT 6.8 Diagram outlining the calculation of HOLT EP and FCFF. EXHIBIT 6.9 The HOLT price‐to‐book ratio for different combinations of fade and EROI. EXHIBIT 6.10 A table and chart showing Amazon's operating EP.
... free cash flow a bad thing in the short to medium term if a company has a host of positive NPV strategies to investin? The answer is a resounding “No!” Capital providers will excitedly queue to invest in positive NPV projects, each of ...
... free cash flow and economic profit methods are equal for a given forecast. We demonstrate the equivalence. The goal for a company is not to increase earnings but rather to increase economic profit. Management bonuses should be tied to ...
Contents
PURSUE | |
WHATS IT WORTH? VALUING THE FIRM | |
A REVIEW OF CONVENTIONAL VALUATION | |
MODEL | |
THE FLYING TRAPEZE OF PERFORMANCE | |
HOLT ECONOMIC PROFIT | |
GEOMETRIC AVERAGE? | |
THE COMPETITIVE LIFECYCLE | |
THE PERSISTENCE OF CORPORATE | |
FORECASTING GROWTH | |
RISK REWARD AND THE HOLT DISCOUNT | |
NOTES | |
CLOSING THOUGHTS | |