Corporates and Investors Share an Understanding of the Language of Intrinsic Value

As we have illustrated in the following chart, we represent schematically the essence of corporate action as the accumulation of “units of demand”, and the essence of the art of investment as the accumulation of “units of value”. Both achieve their respective goals by harnessing economic drivers ranging from totally exogenous to largely discretionary.

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The chart also shows that, for the most part, these economic drivers are the same in both worlds. Corporate management need not be puzzled by the drivers affecting their asset valuation. For all the opacity of the financial language and the volatility of financial markets, the drivers affecting the Intrinsic Value of a firm are the same as those affecting corporate strategy, and centre around:

  • Available Growth

  • Capital Consumption (at maintenance and growth levels)

  • Replacement Value of Assets

  • Economic Rent on Capital Invested

  • Competitive Advantage Period

 

With its Residual Income and Intrinsic Value approach, from which it derives all its analysis, ValuAnalysis provides a common economic language and concepts understood by Corporate Management and Investors alike.