5 Posts found for Author: Aaron Gilcreast

You can sometimes develop discrete measurements of what a company’s intrinsic value might be under different operators by conducting due diligence for a merger or acquisition. But even in the absence of a potential transaction, you should still assess the hypothetical intrinsic value of your businesses if they were operated by someone else. This can help you establish strategies that maximize value. If one of … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subjects: Finance, Management, Strategy

Total shareholder return is typically analyzed as the sum of price appreciation and dividend payouts over a given time period. But this analysis is problematic, because both of these component metrics represent the allocation, not the source, of created business value. They don’t explain what created the value that drove the share price higher or generated the cash needed to pay a dividend.

The actual drivers … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subject: Finance

Intrinsic value is a forward-looking measure of the fundamental worth of a business. Defined as the present value of future cash flows generated by assets, it is a truer reflection than shareholder returns of the value of your strategies and your ability to execute them. When you use intrinsic value instead of TSR to guide decision making, you are less likely to worry about the … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subject: Finance

Share price matters, as do your shareholders. But your share price is, by its nature, an output: a complex, rolled-up reflection of company performance, conjecture, fickle asset-class preferences, risk appetite, ownership mix, supply–demand equilibriums, and fluid expectations held by millions of shareholders who can change their minds in a millisecond. Good luck trying to manage that.

Moreover, your share price is subject to a more fundamental … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subject: Finance

When your company establishes a credible long-term strategy — including a way to play in the market and the capabilities to deliver — it sets up a high level of certainty. In valuation terms, your market value (your shareholders’ expectations) will more closely reflect your intrinsic value (the profits you consistently create). This is a tremendous source of strength, but it also triggers the paradox … [ Read more ]

Content: Article | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subjects: Finance, Management, Strategy