Value-at-Risk (VAR) – CFA Level 2 & 3

Value-at-Risk (VAR) is a critical concept for risk and portfolio management which is often taught during CFA level II and level III. Value-at-Risk is a measure of the minimum loss expected in either dollar or percentage terms as it relates to the portfolio value. VAR is measured both over a period of time (ex. 1 […]

Meta is Now a Value Investment at 10.4x P/E after its 67% Decline!

With the S&P down 16% from 52-week highs, the correction in the market is starting to get me excited about stock valuations again and putting fresh savings to work in my investment portfolio. Technology companies have taken a particularly hard hit with the Nasdaq down 30% over the past year. Meta is one such company […]

Microsoft’s Valuation is Looking Attractive after its 32% Decline

With the S&P down 19.0% from 52-week highs, the correction in the market is starting to get me excited about stock valuations again and putting fresh savings to work in my investment portfolio. Technology companies have taken a particularly hard hit with the Nasdaq down 31.5% over the past year. Microsoft has a strong economic […]

Invested Capital Formula: The Exact Balance Sheet Line Items to Use

Invested capital is one of the main components of the popular Return on Invested Capital, or ROIC, metric. There are two main ways to calculate Invested Capital: Operating Approach Financing Approach I will show you the EXACT line items to use for each approach. Unbelievably, you can’t find this information anywhere on the internet. It […]

Valuing High Growth Companies – A Common Sense Framework

Learning about valuing high growth companies seems almost like an oxymoron. The stock market clearly has two opposing camps – growth and value – and so the idea of putting a valuation on a growth stock can sound heretical to some. But as Warren Buffett once said, “Growth and value investing are joined at the […]

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 […]