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 57
... cost of equity. It decreases as growth increases for the value destroyer; equals the inverse of the cost of equity for value‐neutral corks; and increases with growth for value creators. EXHIBIT 2.9 The P/B ratio for different ...
... rate of 4.8% was assumed to be consistent with the earlier analysis. The ... cost of capital possess a competitive advantage. Colgate‐Palmolive's excess ... equity is. The impact of CAP on P/B increases significantly as the spread ...
... cost of equity is 10%, constant growth in book equity is 5%, and forward spread equals (ROE1 – re). EXHIBIT 5.4 Strategic Resources and Consequences Report proposed by Professors Lev and Gu. The information in squares is quantitative ...
... cost of capital perspectives is demonstrated. EXHIBIT 7.9 The relationship between the various costs of capital. The asset or unlevered cost of capital is constant and equals ... cost of equity, 1912–1920. EXHIBIT 8.2 A stylized view of the.
... cost of equity. Starbucks, the purveyor of fine coffee, had similarly high expectations in January 2009. Its cash flow return on investment (CFROI) was expected to rise from 8.5% to 9.3% over the ensuing five years. This seemingly small ...
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 | |