So Credit Suisse has done a ton of work on HOLT and sells it presumably for a bunch of money. All over their smersh on HOLT it talks about “idea generation”. There aren’t empirical studies that I know of showing that HOLT is any good for anything. That means either a) it’s not worth much or b) it’s just doing something you need to do first to get good valuation models or c) something else.
If it really was useful at valuing equities, why would Credit Suisse be selling it to other people?
Here’s the description from their website:
“The CFROI® metric result is calculated in two steps: First, we measure the inflation-adjusted gross cash flows available to all capital owners in the company and compare that to the inflation-adjusted gross investment made by the capital owners. We then translate this ratio of gross cash flow to gross investment into an Internal Rate of Return (IRR) by recognizing the finite economic life of depreciating assets and the residual value of non-depreciating assets. The CFROI® result approximates the economic return produced by the firm’s projects.
HOLT’s proprietary CFROI® performance measure corrects many common distortions found in traditional accounting measures of performance, such as: inflation, depreciation method, asset mix, asset life, deferred taxes, pension accounting, research and development, off-balance sheet items, inventory accounting, asset holding gains or losses, acquisition accounting, investments, and revaluations. Thus, true economic wealth creation or destruction can easily be assessed to determine a company’s warranted value. ”
Edit: Can’t believe all these other posters just blew you off there.
… ok now packing up to hit some traffic.