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A corporate performance metric should provide insights into what a firm is worth. Most money managers utilize common earnings-based measures of corporate performance and value, which are suspect and easy to manipulate. Applied Finance developed the Economic Margin (EM) framework to remove the noise inherent in accounting data.
Traditional accounting-based valuation methods provide an incomplete view of a company’s value by not accounting for the investment needed to generate the earnings, cost of capital, inflation or cash flow. […more]
- In June, Applied Finance published an article that explored the role of intrinsic value in passive indexing where we studied various value-weighted approaches to form position sizes based on market value, book value and intrinsic [...more]