Analysing the sources of value
After restating accounting data into relevant economic numbers, we systematically break down a company’s market value into its three sources of value: Replacement, Franchise and Growth:
1.
We identify all on and off-balance sheet operating assets and economically depreciate them to determine the company’s
Replacement Value
2.
If the Economic Rent sustainably exceeds the cost of capital, then ongoign shareholder value is accumulated over time. It is called Franchise Value
3.
The Growth Value is the company’s total market value less the Replacement and ranchise value. It reflects the market’s expectations of the company’s growth prospects
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