How Price to Book Misleads Investors
Investors that still rely on P/B (including anyone in a value index fund) are in the Danger Zone.
Sam McBride
Investing 101
Sam McBride
Don’t Get Misled by Return on Equity (ROE)
ROE lacks the necessary analytical rigor to support diligent investment decisions.
Kyle Guske II
P/E Ratios Are Misleading… Especially Right Now
P/E ratios are not a good measure of value, and that’s especially true this year. Investors that rely on P/E ratios are in the Danger Zone.
Sam McBride
Average Invested Capital: Explanation and Examples
In our calculation of ROIC, we use a time-weighted average invested capital, to most accurately capture the capital available to a business that can be used to generate NOPAT...
Kyle Guske II
Invested Capital Turns: Explanation and Examples
Invested capital turns are an important consideration in the analysis of return on invested capital (ROIC) and a key measure of balance sheet efficiency.
Kyle Guske II
3-Year Average Return on Invested Capital: Explanation & Examples
3-year average return on invested capital (seen in Figure 1) provides additional insights into a firm’s track record of prudent capital management.
Kyle Guske II
GAAP-Based Return on Invested Capital: Explanation & Examples
GAAP-based ROIC is based on a simplified after-tax profit (NOPAT) and invested capital that can easily be calculated using only the income statement and balance sheet.
Kyle Guske II
Weighted Average Cost of Capital (WACC) Update
We recently discovered an opportunity to improve upon our cost of capital (WACC) calculations for the 5,000+ models we manage for clients.
Sam McBride
Value Investing 2.0 & The Technology Behind New Constructs
New Constructs was founded to build best valuation models in the business across thousands of securities. To build the best models, we had to create our own data collection...
Kyle Guske II
Building The Best Model Portfolio: Executive Compensation Aligned With ROIC Webinar
In this webinar, CEO David Trainer, will discuss the importance of return on invested capital (ROIC), why linking executive compensation to ROIC is beneficial, and how New...
Kyle Guske II
FinTech: Disruptive Tech To Parse SEC Filings & Build Valuation Models Webinar
In this webinar, CEO David Trainer, will discuss our propriety research system, what makes us better, and how we can help protect investors, directors, and auditors.
Kyle Guske II
5 Ways Corporate Governance Affects Investors and Stock Valuations Webinar
In this webinar, David Trainer, a Wall Street veteran, will discuss corporate governance issues to be aware of, how they can affect an investors portfolio, and how they affect...
Kyle Guske II
The Power Of Quantifying Market Expectations
Sometimes, even the most well recognized experts make shockingly bad predictions. No one truly knows (legally) what the market is going to do next, and the risk involved in...
Sam McBride
Free Cash Flow (FCF): Explanation & Examples
There are many ways to calculate free cash flow. Most approaches are short cuts to our more comprehensive approach to the calculation. The formula for FCF can be seen in...
Kyle Guske II
Economic Earnings: Explanation & Examples
To derive economic earnings, 30+ adjustments must be made to accounting earnings. These adjustments remove items hidden in the footnotes and MD&A of annual filings and close...
Kyle Guske II
Weighted Average Cost of Capital (WACC): Explanation & Examples
WACC plays a key role in our economic earnings calculation. It is hard to be 100% certain about the exact cost of a company’s capital. Our guiding principle when calculating...
Kyle Guske II
Return On Invested Capital (ROIC): Explanation & Examples
The formula (see Figure 1) for calculating ROIC is easy. The hard part is finding all the data, especially from the footnotes and MD&A, required to get NOPAT and Invested...
Kyle Guske II
Net Operating Profit After-Tax (NOPAT): Explanation & Examples
We calculate NOPAT in two ways, from an operating and financing perspective. See Figure 1. Figure 1 shows the basic calculations. On page 2, we share the complete calculations...
Kyle Guske II
Invested Capital: Explanation & Examples
We calculate invested capital in two mathematically equivalent ways: financing and operating approach. Figure 1 shows the basic calculations. On page 2, we share the complete...
Kyle Guske II
How To Protect Your Portfolio As Well As Your Colleagues Webinar
In this webinar, CEO David Trainer, a Wall Street veteran, will discuss strategies that worked in the last market crash and the one thing that always matters when everything...
Kyle Guske II