We are taking our approach to the valuation of businesses in a new direction.
Many metrics, including those that measure resources relative to shares or market cap, have proven of exceptionally low utility, so they will be left by the wayside, as will be quick and dirty market cap valuation methodologies in which the divisor is company shares.
We will be discontinuing the Deep Value Grading System, as well, as it too easily lends itself to misinterpretation.
Basic cash flow analysis will take a back seat to a new costing methodology that leverages our experience with and passion for cost accounting: True All-in Cost (TAIC). Four additional valuation metrics extend therefrom: True Value, True Value Discount, Absolute Cost Structure (ACS) and MTQ Score.
The following key metrics will now represent the chief means by which we arrive at determinations concerning value:
|True All-in Cost (TAIC)|
|True Value Discount (TVD)|
|Absolute Cost Structure (ACS)|
Although we have devoted a great deal of time to the development of our acquisition formulas (TAC), they too have proven of too little essential everyday value to support unless we find ourselves in a situation that requires the valuation peculiarities that set them apart, including their spot price independence.
*True Value shouldn’t be misconstrued as a Price Target. Our targets are based upon projected annual cash flows to which a multiple is assigned; the multiple is determined by analyzing Net Profit Margin and Absolute Cost Structure.
Occasionally, at our discretion, we will publish a Target in addition to True Value.
Final Thoughts (They are never final.)
Historically, our valuation methodologies have utilized fully-diluted shares. We are actively considering transitioning to a Free-Float methodology in order to better anticipate future tendencies of price.