How to Value a Stock With a Reverse DCF (with Examples)
Finding the value of a company matters a great deal; some would argue that it remains the single most important item on anyone’s checklist. Figuring out how much the company is worth or its intrinsic value will help you determine your price and what kind of long-term return you might achieve. Using a discounted cash flow […]
How to Calculate Invested Capital for ROIC (the right way)
Do you know how to calculate Invested Capital the right way? Did you know there are two different equations for the same Invested Capital formula, and they mean two different things? I’ve seen the words Invested Capital tossed around lightly many times online, and while the intentions are good, the execution is not. When Invested […]
WACC vs. ROIC: Is Shareholder Value Being Created or Destroyed?
Measuring a business’s economic moat is a challenge, but a comparison using several metrics allows us to get an economic moat idea. That comparison is the grudge match of finance, WACC vs. ROIC. Warren Buffett speaks numerous times about his fondness for companies with economic moats. His best investments, such as See’s Candies, Coca-Cola, and […]
Return on Capital Employed: Ratio for Profitability and Capital Efficiency
One of Terry Smith’s investing foundations’ main pillars is to invest in good companies that he defines as companies with high returns on capital employed. For those unfamiliar with Smith, he runs Fundsmith, whose returns have almost doubled the returns of the S&P 500 over the last decade. Smith’s Fundsmith has investments that have averaged […]
Guide to Terminal Value, Using The Gordon Growth Model
When we buy a company, we dream that the company’s high growth rate will live on forever. Unfortunately, that is not a reality unless you are Amazon. For the rest of us, facing that reality means utilizing a terminal value with the Gordon growth model as our best means to an end. Did you know […]
Explaining the DCF Valuation Model with a Simple Example
Discounted Cash Flow (DCF) valuation remains a fundamental value investing model. Using a DCF continues to be one of the best ways to calculate a company’s intrinsic value. Using a DCF remains the main method analysts use throughout finance, and some think using this type of valuation remains far too complicated for them. In today’s […]
What is a Hyperinflationary Economy and What Are the Effects?
In a time where inflation is a hot topic around the coffee bar, let’s take a deeper look at a hyperinflationary economy and the impacts that it can have. With the United States economy currently on crutches and war in Ukraine with no current end in sight, inflation and recession have become a part of […]
Is Investment Management A Good Career Path? Exploring Investing Jobs
If you’re thinking about a career in finance and you enjoy working with people, you may find the investment niche quite attractive. Plus, with the right skills, it’s easy to find the job enjoyable and satisfactory in terms of rewards and perks. But what career path should you take if you want to work as […]
How to Calculate the Cost of Debt
Determining the value of a financial asset is part of the process of calculating the present value of future cash flows. To value a company, we need to have a sense of magnitude and sense of those cash flows, plus any risk associated with receiving that cash. Part of determining the future value of those […]
The 3 Inputs for the Cost of Equity Formula
The value of any financial asset is the present value of its future cash flows discounted to the present. That is the basis of any discounted cash flow model and part of the process for valuing any company. Part of that analysis determines the cost of capital or discounting factor of those cash flows. There […]
