Equity Research - Global Equity Valuation and Corporate Performance Insights

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The Applied Finance Group (AFG) has been providing institutional equity research for over 13 years to some of the largest institutional investment, consulting, and corporate firms globally. Our success has been a direct result of our track record, as seen below.

As the demand for our unique valuation and corporate performance insights has grown globally, so has our research. This summer we will be unveiling our global research platform which will provide our clients the ability to analyze companies around the world using our proprietary Economic Margin Framework and Valuation Methodology. To view our global performance booklet, click here.

For investors that are interested in knowing how our clients can rate the quality of management teams, below are two sample Wealth Creation Reports comparing General Motors and Porsche.  The graph below the wealth creation report represents the return of the company relative to the market. As you will notice, GM’s management team has had a consistent track record of destroying share holder value, while Porsche has done a great job of creating wealth for its shareholders.

While knowing how well management has run a company is important, you must always remember that great companies don’t always make great investments. This is why we overlay our valuation system to explicitly address the four main value drivers of enterprise value: profitability, competition, growth, and cost of capital. Unlike traditional valuation approaches that utilize highly sensitive perpetuity assumptions, our approach incorporates the widely accepted economic principle that competition will compete away excess returns over time.

Variables Defined:

Valuation Model – Using AFG’s modified discounted cash flow model to measure the intrinsic value of a firm compared to its peers. AFG's Value Score - A score which represents the ranked percent to target (deviation between stock’s current trading price and AFG’s current default target price) or attractiveness (upside) relative to the universe. A Value Score of 100 is the most undervalued and 0 is the most overvalued company in the universe.

Earnings Quality, Accrual - An accrual is the difference between Cash Flow and Net Income. •Net Income = Cash Flow + Accruals •Low Accrual companies outperform high accrual companies

EM Momentum - EM +1: 1 Month Momentum - Month over month change in the 1 year out Economic Margin.

Management Quality - Evaluating Management:
• Assess the companies Economic Margin.
• Evaluate the ability for a company to sustain historical levels of Economic Margin performance.
• Build out future cash flows to better evaluate expected future performance relative to their peer group.
• Look at investment prospects of firms and review how they are growing or shrinking their business.