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
Results 1-5 of 42
... RETURN ON INVESTED CAPITAL P/E AS A VALUATION METRIC AND DISCOUNTED CASH FLOW VALUATION APPROACH HALLMARKS OF A SOUND ECONOMIC PERFORMANCE AND VALUATION MODEL CHAPTER APPENDIX NOTES 3 ACCOUNTING TO CASH FLOW RETURN ON INVESTMENT KEY ...
... Return on invested capital calculation for Amazon in 2012 and 2013. EXHIBIT 2.8 The P/E ratio for different combinations of constant growth and ROE assuming a 10% cost of equity. It decreases as growth increases for the value destroyer ...
... ROIC = EBIT% × (1 – Tc) × Invested capital turns. EXHIBIT 4.6 Financial forecast and EP valuation of Air Liquide. The market enterprise value was circa €44bn as of December 31, 2014, and December 31, 2015. EXHIBIT 4.7 Forecast scenarios ...
... return on invested capital (ROIC), and cash flow return on investment (CFROI). All measures of profitability can be split into two drivers whereby Profitability = Profit Margin x Asset Turns. Net profit margin is net income divided by ...
... ROIC CFROI g: Growth in book equity Growth in invested capital Real growth in IAGI r: Cost of equity, re Weighted- average cost of Real cost of capital, HOLT capital (WACC) DR f: ROE fades to re ROIC fades to WACC CFROI fades to HOLT DR ...
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 | |