Modified Book Value
What is Modified Book Value? Modified book value is one of the several valuation methods used by analysts and investors to assign a value to a company. The modified book value method works by adjusting the net worth of a company’s assets and liabilities to obtain their fair market value. For example, the market value…
EV/Capital Employed Ratio
What is the EV/Capital Employed Ratio? EV/Capital Employed Ratio is a measure of enterprise value normalized by the level of capital used by the business. For example, a large business with a large capital stock is bound to realize a large enterprise value solely due to its large capital holdings. What Does the Numerator (ROCE)…
Residual Income Valuation
What is Residual Income Valuation? Residual income valuation (also known as residual income model or residual income method) is an equity valuation method that is based on the idea that the value of a company’s stock equals the present value of future residual incomes discounted at the appropriate cost of equity. Further Analysis…
Earnings Yield
What is Earnings Yield? The earnings yield is a financial ratio that describes the relationship of a company’s LTM earnings per share to the company’s stock price per share. The earnings yield is the inverse ratio to the price-to-earnings (P/E) ratio. The quick formula for Earnings Yield is E/P, earnings divided by price. The yield…
EV/EBIT Ratio
Conglomerate Discount
What is a Conglomerate Discount? Conglomerate discount isn’t what its name may suggest. It’s a drawback for a conglomerate with multiple sections/divisions/companies, all of which aren’t generally successfully run as a cohesive unit. As a result, the market may discount the value of a multi-division corporation, giving less value to its earnings. Calculating the Conglomerate…
Momentum Indicators
What are Momentum Indicators? Momentum indicators are tools utilized by traders to get a better understanding of the speed or rate at which the price of a security changes. Momentum indicators are best used with other indicators and tools because they don’t work to identify the direction of movement, only the timeframe in which the…
Pairs Trading
What is Pairs Trading? Pairs trading is a strategic trading option that is used to generate profits regardless of market direction. Traders utilizing the pairs strategy determine two securities that: Share similar characteristics and have a high positive correlation Are trading at a price that is contradictory to their historical trading prices One of the…
Lifetime Value Calculation
What is Lifetime Value Calculation? Lifetime Value Calculation is the process by which a business measures the value of a customer to the business through the customer’s full lifespan. Customer Lifetime Value or LTV is one of the metrics used to measure the growth of a company. By comparing the LTV of a…
