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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... Shareholders' Equity. The latter is what remains in book terms. EXHIBIT 1.2 The financial economist's balance sheet equation is Market Value of Assets equals Market Value of Total Liabilities plus Market Value of Shareholders' Equity ...
... Shareholders have been handsomely rewarded. EXHIBIT 3.33 Amazon's 2013 CFROI calculation. EXHIBIT 3.34 Roper Technologies Relative Wealth Chart as of June 16, 2015, indicates that it grows by acquisition. Although goodwill dilutes ...
... shareholder return. The y‐axis is the firm's starting position, the x‐axis is its ending position five years later EXHIBIT 8.10 General features of competitive life‐cycle states. EXHIBIT 8.11 Percent of publicly traded firms by life ...
... Shareholders have been handsomely rewarded. EXHIBIT 11.3 Factoring probability into Amazon's Relative Wealth Chart ... shareholder return by CFROI relative achievement. Largest 1,000 stocks by market capitalization, U.S. equities ...
... shareholders.” Nigel Bolton, Chief Investment Officer Fundamental Active Equity, BlackRock “HOLTCFROI is a useful framework through which we can compare a stock's market valuation versus what the economic enterprise's cash flow ...
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 | |