{"product_id":"beyond-earnings-isbn-9781119440482","title":"Beyond Earnings","description":"\u003cp\u003e\u003ci\u003eBeyond Earnings\u003c\/i\u003e 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.\u003c\/p\u003e \u003cp\u003eBecause 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.\u003c\/p\u003e \u003cp\u003eThis 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.\u003c\/p\u003e \u003cp\u003eAs 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.\u003c\/p\u003e \u003ci\u003eBeyond Earnings\u003c\/i\u003e is an indispensable guide for investors who want to improve their odds of outperforming the competition. \u003cp\u003eIntroduction xix\u003c\/p\u003e \u003cp\u003eThe Pricing Puzzle: Foundational HOLT Concept and a Key to Better Valuation xix\u003c\/p\u003e \u003cp\u003eOverview of Book Chapters xxvi\u003c\/p\u003e \u003cp\u003eWho Are We and What Do We Hope to Achieve xxviii\u003c\/p\u003e \u003cp\u003e\u003cb\u003eI Financial Performance Assessment\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Never Forget the Golden Rule: Pursue Strategies with Positive NPV 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 3\u003c\/p\u003e \u003cp\u003eIntroduction 4\u003c\/p\u003e \u003cp\u003eWhat Do Corporate Financial Managers Do During the Day? 6\u003c\/p\u003e \u003cp\u003eWhat Is Value? 8\u003c\/p\u003e \u003cp\u003eThe Golden Rule of Financial Decision Making 12\u003c\/p\u003e \u003cp\u003eBack-of-the-Envelope Basics 15\u003c\/p\u003e \u003cp\u003eIs the NPV Rule Foolproof? 20\u003c\/p\u003e \u003cp\u003eThe Price of Short-Termism 22\u003c\/p\u003e \u003cp\u003eThinking Clearly about Actions, Reactions, and Value 28\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 The Flying Trapeze of Performance Metrics 31\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 31\u003c\/p\u003e \u003cp\u003eMeasures of Corporate Performance 32\u003c\/p\u003e \u003cp\u003eReturn on Equity 33\u003c\/p\u003e \u003cp\u003eWhat about Debt and Leverage? 36\u003c\/p\u003e \u003cp\u003eReturn on Assets 39\u003c\/p\u003e \u003cp\u003eReturn on Invested Capital 39\u003c\/p\u003e \u003cp\u003eP\/E as a Valuation Metric and Discounted Cash Flow Valuation Approach 44\u003c\/p\u003e \u003cp\u003eHallmarks of a Sound Economic Performance and Valuation Model 51\u003c\/p\u003e \u003cp\u003eChapter Appendix 53\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Accounting to Cash Flow Return on Investment 57\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 57\u003c\/p\u003e \u003cp\u003eIs CFROI a Better Measure of Performance? 58\u003c\/p\u003e \u003cp\u003eReturn on Invested Capital (ROIC) 62\u003c\/p\u003e \u003cp\u003eCash Return on Gross Assets (CROGA) 63\u003c\/p\u003e \u003cp\u003eCash Flow Return on Investment (CFROI) 63\u003c\/p\u003e \u003cp\u003eCFROI Adjustments Using Amazon’s 2013 Annual Report 65\u003c\/p\u003e \u003cp\u003eInflation-Adjusted Gross Investment 66\u003c\/p\u003e \u003cp\u003eDepreciating Assets 68\u003c\/p\u003e \u003cp\u003eGross Plant Recaptured 81\u003c\/p\u003e \u003cp\u003eTotal Depreciating Assets 81\u003c\/p\u003e \u003cp\u003eNon-Depreciating Assets 82\u003c\/p\u003e \u003cp\u003eAsset Life 89\u003c\/p\u003e \u003cp\u003eGross Plant Asset Life 90\u003c\/p\u003e \u003cp\u003eLife of Capitalized Operating Leases 91\u003c\/p\u003e \u003cp\u003eCapitalized R\u0026amp;D Life 91\u003c\/p\u003e \u003cp\u003eCalculating the Life of Depreciating Assets 91\u003c\/p\u003e \u003cp\u003eGross Cash Flow 94\u003c\/p\u003e \u003cp\u003eNet Income after Tax 95\u003c\/p\u003e \u003cp\u003eDepreciation and Amortization 97\u003c\/p\u003e \u003cp\u003eInterest Expense 97\u003c\/p\u003e \u003cp\u003eRental Expense 98\u003c\/p\u003e \u003cp\u003eResearch and Development Expense 98\u003c\/p\u003e \u003cp\u003eNet Monetary Asset Holding Gain 99\u003c\/p\u003e \u003cp\u003eFIFO Profits 99\u003c\/p\u003e \u003cp\u003eStock Compensation Expense 100\u003c\/p\u003e \u003cp\u003ePension Expense 101\u003c\/p\u003e \u003cp\u003eMinority Interest 102\u003c\/p\u003e \u003cp\u003eSpecial Items 102\u003c\/p\u003e \u003cp\u003eCFROI Calculation for Amazon 103\u003c\/p\u003e \u003cp\u003eUnderstanding the Relative Wealth Chart 105\u003c\/p\u003e \u003cp\u003eA Comment on Goodwill 106\u003c\/p\u003e \u003cp\u003eChapter Appendix: Gross Plant Recaptured 109\u003c\/p\u003e \u003cp\u003e\u003cb\u003eII Discounted Cash Flow and Economic Profit Valuation\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 What’s It Worth? Valuing the Firm 113\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 113\u003c\/p\u003e \u003cp\u003eA Review of Conventional Valuation Approaches 114\u003c\/p\u003e \u003cp\u003eThe Entity Free Cash Flow Approach 114\u003c\/p\u003e \u003cp\u003eValuing the End of the Line 118\u003c\/p\u003e \u003cp\u003eEconomic Profit Approach 124\u003c\/p\u003e \u003cp\u003eWhat Is Fade? 127\u003c\/p\u003e \u003cp\u003eFade in Economic Profit Equation 129\u003c\/p\u003e \u003cp\u003eHOLT Approach to FCFF Valuation 130\u003c\/p\u003e \u003cp\u003eNominal Gross Cash Flow 130\u003c\/p\u003e \u003cp\u003eTotal Investment 132\u003c\/p\u003e \u003cp\u003eDebt and Equivalents 136\u003c\/p\u003e \u003cp\u003eValuing Different Forecast Scenarios for Amazon in the HOLT Framework 138\u003c\/p\u003e \u003cp\u003eValuing Air Liquide in HOLT Lens 145\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 Quantifying the Value and Risk of a Company’s CAP 151\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 151\u003c\/p\u003e \u003cp\u003eIntroduction 152\u003c\/p\u003e \u003cp\u003eThe Worst Investment I Ever Made 154\u003c\/p\u003e \u003cp\u003eQuantifying the Magnitude and Sustainability of CAP 158\u003c\/p\u003e \u003cp\u003eThought Experiment: The Valuation of Core Unlimited 164\u003c\/p\u003e \u003cp\u003eThe Probability of Permanent Disruption 168\u003c\/p\u003e \u003cp\u003eThe Characteristics of Competitive Advantage 169\u003c\/p\u003e \u003cp\u003eFade Is a Value Driver 172\u003c\/p\u003e \u003cp\u003eThe Fundamental Pricing Model 172\u003c\/p\u003e \u003cp\u003eThe Value Driver Tree 174\u003c\/p\u003e \u003cp\u003eROIC 174\u003c\/p\u003e \u003cp\u003eInvestment Growth 175\u003c\/p\u003e \u003cp\u003eFade 175\u003c\/p\u003e \u003cp\u003eCost of Capital 177\u003c\/p\u003e \u003cp\u003eInvestment Growth Is a Value Driver 177\u003c\/p\u003e \u003cp\u003eApplying the Fundamental Pricing Model 178\u003c\/p\u003e \u003cp\u003eFinal Thoughts for the Moment 183\u003c\/p\u003e \u003cp\u003eChapter Appendix 184\u003c\/p\u003e \u003cp\u003eValuation Mathematics 184\u003c\/p\u003e \u003cp\u003eInputs for Valuing Macy’s and Assessing Its Competitive Advantage Period 186\u003c\/p\u003e \u003cp\u003eA Detour Through the Twilight Zone: Making Sense of P\/E 187\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 HOLT Economic Profit 191\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 191\u003c\/p\u003e \u003cp\u003eIntroduction 193\u003c\/p\u003e \u003cp\u003eCalculating CFROI as a Ratio 196\u003c\/p\u003e \u003cp\u003eHOLT Economic Profit 200\u003c\/p\u003e \u003cp\u003eThe Power of Simplicity: Spread, Fade, and Growth in an EP Framework 204\u003c\/p\u003e \u003cp\u003eUsing Economic Profit to Measure the Value of Acquisitions 205\u003c\/p\u003e \u003cp\u003eDecomposing Value Creation into Delta EP Components 208\u003c\/p\u003e \u003cp\u003eWhat about Goodwill? 210\u003c\/p\u003e \u003cp\u003eCase Study: Danaher Corporation 212\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Risk, Reward, and the HOLT Discount Rate 217\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 217\u003c\/p\u003e \u003cp\u003eRisk, Return, and Diversification 218\u003c\/p\u003e \u003cp\u003eWhat Is Risk? 221\u003c\/p\u003e \u003cp\u003eHow Do Corporate Managers Discount Cash Flows to Present Value? 223\u003c\/p\u003e \u003cp\u003eHow Should Investors Think about Risk When Discounting Cash Flows? 223\u003c\/p\u003e \u003cp\u003eHow Large Is the Equity Risk Premium (ERP)? 226\u003c\/p\u003e \u003cp\u003eShould I Use the Arithmetic or Geometric Average? 228\u003c\/p\u003e \u003cp\u003eOther Risk Factors to Consider 228\u003c\/p\u003e \u003cp\u003eIntroduction to the HOLT Approach of Estimating a Firm’s Discount Rate 231\u003c\/p\u003e \u003cp\u003eRelating the HOLT Discount Rate and Framework to CAPM and APV 237\u003c\/p\u003e \u003cp\u003eWhat Type of Discount Rate Is the HOLT Cost of Capital? 238\u003c\/p\u003e \u003cp\u003eValuation Method Equivalence 239\u003c\/p\u003e \u003cp\u003eCapital Cash Flows 243\u003c\/p\u003e \u003cp\u003eCost of Capital and Its Relationship to Debt 243\u003c\/p\u003e \u003cp\u003eChapter Appendix: Do Equity Discount Rates Mean Revert? 245\u003c\/p\u003e \u003cp\u003eGeneral Observations about Annual Changes in the U.S. Discount Rate 247\u003c\/p\u003e \u003cp\u003eHow Does the Monthly Change in the U.S. Discount Rate Behave? 249\u003c\/p\u003e \u003cp\u003eDoes the Discount Rate Mean-Revert? 250\u003c\/p\u003e \u003cp\u003eHow Do Changes in the Discount Rate Manifest in the Equity Risk Premium? 252\u003c\/p\u003e \u003cp\u003eThe Bitter Truth about Mean Reversion 253\u003c\/p\u003e \u003cp\u003e\u003cb\u003eIII Value Driver Forecasting\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 The Competitive Life-Cycle of Corporate Evolution 257\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 257\u003c\/p\u003e \u003cp\u003eIntroduction 258\u003c\/p\u003e \u003cp\u003eWhat Is Fade? 262\u003c\/p\u003e \u003cp\u003eThe Competitive Life-Cycle 262\u003c\/p\u003e \u003cp\u003eDetermining a Firm’s Life-Cycle Position 264\u003c\/p\u003e \u003cp\u003eQuestion Marks (Early Life-Cycle) 265\u003c\/p\u003e \u003cp\u003eStars 267\u003c\/p\u003e \u003cp\u003eCash Cows 270\u003c\/p\u003e \u003cp\u003eDogs (Turnarounds or Restructuring) 274\u003c\/p\u003e \u003cp\u003eFinal Remarks on the Competitive Life-Cycle 276\u003c\/p\u003e \u003cp\u003eEssential Facts about the Competitive Life-Cycle 278\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 The Persistence of Corporate Profitability 281\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 281\u003c\/p\u003e \u003cp\u003eLong-Term Real Return on Investment 282\u003c\/p\u003e \u003cp\u003eThe Long-Term Real Required Rate of Return 283\u003c\/p\u003e \u003cp\u003eMeasuring Persistence 286\u003c\/p\u003e \u003cp\u003eTransition Matrices as a Means of Quantifying Fade 286\u003c\/p\u003e \u003cp\u003eIndustry Persistence: Does Industry Matter? 287\u003c\/p\u003e \u003cp\u003eReversion to the Mean 290\u003c\/p\u003e \u003cp\u003eCompetitive Advantage and Its Effect on Fade 292\u003c\/p\u003e \u003cp\u003eIndustry CFROI Persistence 295\u003c\/p\u003e \u003cp\u003eDoes CFROI Persistence Vary over Time? 296\u003c\/p\u003e \u003cp\u003ePutting It All Together: Developing a Mean-Reverting Forecast Model 297\u003c\/p\u003e \u003cp\u003eConclusion 300\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Forecasting Growth 303\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 303\u003c\/p\u003e \u003cp\u003eMedian Real Asset Growth Rate 306\u003c\/p\u003e \u003cp\u003eThe Average Growth Rate as Companies Mature 307\u003c\/p\u003e \u003cp\u003eIs Corporate Growth Mean-Reverting? 309\u003c\/p\u003e \u003cp\u003eThe Sustainability of Growth 312\u003c\/p\u003e \u003cp\u003eForecasting Growth 313\u003c\/p\u003e \u003cp\u003eMeasuring a Firm’s Sustainable Growth Rate 313\u003c\/p\u003e \u003cp\u003eWhy HOLT Uses a Normalized Growth Rate 315\u003c\/p\u003e \u003cp\u003eForecasting Growth: Near-Term and Long-Term Dynamics 317\u003c\/p\u003e \u003cp\u003eConclusions 319\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Evaluating Market Expectations 321\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eKey Learning Points 321\u003c\/p\u003e \u003cp\u003eThe Relative Wealth Chart as a Decision Aid for Efficiently Assessing Stock Opportunities 322\u003c\/p\u003e \u003cp\u003eDistilling Expectations from a Stock Price 323\u003c\/p\u003e \u003cp\u003eCan It Beat the Fade? 326\u003c\/p\u003e \u003cp\u003eThe Green Dot 328\u003c\/p\u003e \u003cp\u003eThinking about Expectations at Different Life-Cycle States 332\u003c\/p\u003e \u003cp\u003eWhy the Green Dot Is So Helpful 336\u003c\/p\u003e \u003cp\u003ePicking Stocks Across the Life-Cycle 340\u003c\/p\u003e \u003cp\u003eQuestion Mark (Tesla) 340\u003c\/p\u003e \u003cp\u003eStar (Amazon) 343\u003c\/p\u003e \u003cp\u003eeCAP (Nestlé) 346\u003c\/p\u003e \u003cp\u003eCash Cow (DuPont) 348\u003c\/p\u003e \u003cp\u003eDog (BP) 349\u003c\/p\u003e \u003cp\u003eFinal Remarks 353\u003c\/p\u003e \u003cp\u003eChapter Appendix: Gauging Expectations Using PVGO 356\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Closing Thoughts 359\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eIndex 363\u003c\/p\u003e  \u003cp\u003e\u003cb\u003eDAVID A. HOLLAND\u003c\/b\u003e is an independent consultant who serves as a senior advisor to Credit Suisse and is an adjunct professor at the University of Cape Town Graduate School of Business. Formerly, he was a managing director at Credit Suisse based in London. David oversaw HOLT Valuation and Analytics, the research and development arm of Credit Suisse HOLT, and ran their global Custom Solutions Group. \u003c\/p\u003e\u003cp\u003e\u003cb\u003eBRYANT A. MATTHEWS\u003c\/b\u003e is the senior director of research for Credit Suisse HOLT. He has over 20 years of professional experience valuing stocks and helping professional investors improve their stock selection process and valuation models. His research on understanding quality and fade has been adopted by professional investors around the world and led to numerous innovations in the flagship Credit Suisse HOLT Lens application.      \u003c\/p\u003e\u003cp\u003e\u003ci\u003eBeyond Earnings\u003c\/i\u003e 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. \u003c\/p\u003e\u003cp\u003eBecause 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. \u003c\/p\u003e\u003cp\u003eThis 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. The authors leave no doubt that building and maintaining a sustainable competitive advantage is critical to a company's valuation. \u003c\/p\u003e\u003cp\u003eAs 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. \u003c\/p\u003e\u003cp\u003e\u003ci\u003eBeyond Earnings\u003c\/i\u003e is an indispensable guide for investors who use HOLT Lens and want to improve their odds of outperforming the competition.    \u003c\/p\u003e\u003cp\u003e\u003ci\u003eBeyond Earnings\u003c\/i\u003e 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. \u003c\/p\u003e\u003cp\u003eBecause 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. \u003c\/p\u003e\u003cp\u003eThis 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. The authors leave no doubt that building and maintaining a sustainable competitive advantage is critical to a company’s valuation. \u003c\/p\u003e\u003cp\u003eAs 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. \u003c\/p\u003e\u003cp\u003e\u003ci\u003eBeyond Earnings\u003c\/i\u003e is an indispensable guide for investors who use HOLT Lens and want to improve their odds of outperforming the competition.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47988806385893,"sku":"NP9781119440482","price":49.95,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781119440482.jpg?v=1761781665","url":"https:\/\/k12savings.com\/products\/beyond-earnings-isbn-9781119440482","provider":"K12savings","version":"1.0","type":"link"}