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How Does The Earnings Power Valuation Technique (EPV) Work? | Stockopedia Features
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If the market price is below the EPV/per share, then the stock may be undervalued at least according to this view of value!
Reproduction Cost
Once the EPV is determined, it can be compared with the Reproduction Cost (the calculation of which will be discussed in another article). Greenblatt argues that, if EPV is higher than Reproduction Costs, management is creating value and the company is operating at a competitive advantage. If the reverse is true, then management is destroying shareholder value by earning less than the value of the assets and the company operates at a competitive disadvantage (likely to be a commodity business)
Other References
Valuation Technique Earning Power Value OSV: How to value a stock with EPV EPV Case Study: Tandy Brands
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4/9/2014
EPV Case Study: Stella Jones GEICO Case Study TMF: The Power of Earnings
How Does The Earnings Power Valuation Technique (EPV) Work? | Stockopedia Features
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Interesting manipulations to get the numerator, but still highly dependent on the denominator - ie estimated of cost of capital. Another tool in the box!
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manxman
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If EPV can be used as a margin of safety because it doesn't factor potential growth, how much margin of safety does not allowing for growth give?
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