Equity Analysis Using Traditional and Value‐Based Metrics

Informed investors need a prism for discerning value within the companies that they invest in. Historically, investors and analysts alike have evaluated company and stock performance in terms of two seemingly distinct types of financial analysis—namely, traditional fundamental analysis and value-based metrics analysis. Keywords: value-based metrics (VBM); growth rates; margins; return on equity (ROE); Dupont formula; price multiples; comparables; forecasted fundamentals; regression analysis; common factors; fundamental stock return (FSR), undervalued; overvalued stock; Economic Value Added (EVA®); economic value added spread; market value added; cash flow return on investment (CFROI®); residual income (RI); residual income spread; EVA momentum; good company growth; bad company growth; good stocks; bad stocks