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Methodology
ValuePrime utilizes the most advanced models to analyze stocks. We use the discounted cash flow model, relative valuation and proprietary methods to do equity valuations. Here is our overall methodology:
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For our valuations, whenever available, the
trailing 12-month earnings and revenue data are used. Otherwise,
we use data reported in company's latest 10K.
- ValuePrime does not use the beta numbers reported by financial
institutions since this data is based on regression of historical
data which is representative of the past, not the future. Instead,
we use a calculated bottom-up beta that reflects company's present
financial leverage.
- Using company's financial statements
and footnotes, ValuePrime corrects financial
statement misclassifications of research
and development (R&D) and operating
lease expenses by treating
R&D operating expenses as capital
expenses, and converting
long-term operating lease obligations
to debt. These corrections
allow us to calculate new
adjusted values for the
net income, ebit, debt, equity, interest expense,
capital expenditures, depreciation, working capital,
return on capital and return on equity. These
data are then used to forecast realistic free
cash flow and revenue growth numbers.
- Using ValuePrime's proprietary
algorithm, we then adjust revenue and income
to account for seasonal and cyclical variations.
- Each stock is then analyzed
for fair market value based on discounted cash
flow (DCF), relative
valuations and other proprietary
techniques. The ValuePrime engine
uses the most advanced financial
models to analyze stocks. We have
designed 6 distinct equity valuation
models, each applicable to particular
sectors. For example, because of the unique
characteristics of the financial and technology
sectors,
the ValuePrime engine
uses different models to analyze
stocks in each of these sectors.
-
In addition to calculating the fair market
value, each stock is rated for financial strength, risk, momentum and valuation.
- Finally, we combine
all the above
factors
and give
each
stock
an overall letter rating from
F to
A.
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