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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... STOCK PRICE CAN IT BEAT THE FADE? THE GREEN DOT THINKING ABOUT EXPECTATIONS AT DIFFERENT LIFE‐CYCLE STATES WHY THE GREEN DOT IS SO HELPFUL PICKING STOCKS ACROSS THE LIFE‐CYCLE FINAL REMARKS CHAPTER APPENDIX: GAUGING EXPECTATIONS USING ...
... price‐to‐book ratio versus forward CFROI for U.S. industrial and service firms with a market cap exceeding $5bn on September 24, 2015. The HOLT price ... stock's premium is a function of the quality of its earnings (CFROI). EXHIBIT 2.13 ...
... stock has underperformed the S&P 500 since 2014. EXHIBIT 5.15 Share price sensitivity matrices on two different dates for Macy's. The fundamental pricing model was used to generate warranted (intrinsic) share prices for different ...
... Stock price performance. EXHIBIT 8.6 CFROI drivers and competitive advantage. Image shows that best‐in‐class firms possess a rare mix of above‐average margins and asset efficiency. These firms enjoy both a consumer and production ...
... stocks that will beat expectations. It doesn't matter if the expectations are for failure or enormous success: If a company can better those expectations, shareholders will reward the company by pushing its share price higher. The ...
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 | |