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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... 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.
... company should spend about a week going through this material very carefully. If they cannot pass an examination on this text they are not fit to be custodians of shareholder capital.” Emeritus Professor Brian Kantor, University of Cape ...
... company.2 In 1994, Amazon was just a fledgling start‐up. The Internet was beginning to take off as a vehicle for commerce, and growth rates were forecast to be into the hundreds of percent. Seeing an opportunity, Jeff Bezos launched ...
... company's economic profitability and value. The capitalization of R&D is explored in the Asset Life section of Chapter 3. Accounting data does not convey a clear picture of a firm's economic performance, and is becoming less relevant as ...
... company can better those expectations, shareholders will reward the company by pushing its share price higher. The professional employer services firm Automatic Data Processing (ADP) makes this point clear. Since 1991, ADP has earned ...
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 | |