Pre-Order at All Online Bookstores
Security Valuation and Risk Analysis: Assessing Value in Investment Decision-Making
Kenneth S. Hackel, C.F.A.
Reason Book was Written: To introduce a successful and innovative approach to the valuation of equity securities.
Central Tenets: (a) Cost of capital, a principal component of valuation, should not be determined by stock volatility, as is widely practiced by enterprises, investors, consultants and security analysts, but by the entity’s cash flows and credit health; (b) Return on Invested Capital (ROIC), a principal component of valuation, should be measured as a function of the assets production of free cash flows, as it should benchmark the expected cash return for cash expended, and (c) Free cash flow should include cash the entity could easily free up, and this can be captured thru analysis of various discretionary spending areas. EBITDA, an income statement based accounting concept, is not a measure of the true economic return.
