APPLIED FINANCE Learning Center

Intrinsic Value

Research & Insights

Valuation Driven:

Unlike traditional valuation approaches that utilize highly sensitive perpetuity assumptions, the Applied Finance approach incorporates the widely accepted economic reality of competition by estimating a company specific Economic Profit Horizon™. This essentially eliminates the excess spread a firm generates above or below its cost of capital to then discount those cashflows without a perpetuity. 

Small Cap Review:

This is a follow up piece to a recent article focusing on large cap stocks. This commentary will instead look at small cap value/growth relative attractiveness, as well as compare large and small caps. The graphs below will again follow the Applied Finance methodology of using median Valuation levels that are normalized (relative to long-term averages) and with red and green 1.5 standard deviation lines to create a "zone of reasonableness".

The Gross Profitability Trap:

The Valuation Edge is Applied Finance's newsletter to share updates and our Valuation Driven® insights with the investment community. Our goal is the 3 EEE's... Entertain, Engage, and Enlighten the investment community through what we consider to be interesting market observations, economic facts, and company expectations, to better frame the current investment environment. We hope you join and interact with us on what promises to be an interesting long-term journey through buys, sells, and holds.

Valuation Analysis:

Time to Reconsider Large Cap Value & Growth Allocations

Applied Finance has calculated Valuations of major indices on a monthly basis since September of 1998. Calculating the Intrinsic Value upside/downside of every company in an index such as the Russell 1000, we can then take the median and track the results over time to determine how the market looks on a relative basis today vs the past 22 years.

Economic Margin:

During the past ten years, great strides have been made to educate corporate executives and institutional investors regarding the benefits of value-based metrics. In general, Economic Value Added (EVA) has emerged as the standard for corporate governance, while Cash Flow Return on Investment (CFROI) has been the most popular value-based management (VBM) metric among institutional investors. Given that each of these metrics attempts to accomplish the same goal, which is to convert accounting data into economic information, click the link below to see the questions each VBM user should ask:

SMA Strategies

Valuation Dividend:

The Valuation Dividend™ is an investment strategy composed of a focused group of 25-35 stocks designed to provide capital appreciation and a higher than average dividend yield in a tax efficient manner.

Large Cap (Valuation 50):

The Valuation 50™ is a Valuation Driven™ investment strategy composed of a focused group of 50 stocks designed to consistently outperform the S&P 500 index in a tax efficient manner.

Mutual Fund Fact Sheets

Small Cap:

Small Cap - AFDZX

Large Cap:

Large Cap - AFVZX

Learn more about APPLIED FINANCE and our other strategic partners

Past performance does not guarantee future results. Investments in ETFs, Mutual Funds, SMA's and Private Investments involve risk, including possible loss of some or all your principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. This email is for investment professionals only. Do not forward to retail investors. Registered Representative with UMB Distribution Services, LLC 235 W. Galena, Milwaukee, WI 53212