Components of a Value Analysis - dummies

By Peter J. Sander, Janet Haley

Part of Value Investing For Dummies Cheat Sheet

To understand value investing, you need to understand an entity’s intrinsic value, as well as how to analyze strategic financials and compare intangibles. The following table goes into more detail.

Component What Why How
Intrinsic value Total value of discounted future cash flows Valuation starting point

Define potential value range

Reality check

Intrinsic value model
Strategic financials Analyze key ratios and numbers for profitability, productivity,
capital structure as return-on-equity (ROE) drivers
Identify potential for maximizing return on equity (ROE)

Evaluate effectiveness of management and business strategies

Financial statements and ratios

“Strategic Profit Formula”

Strategic intangibles Composite sketch of intangibles: market position, brand
strength, supply chain strength, and management
Judge leading indicators and influencers of profitability,
productivity, and capital structure
Newswires, trade press

Industry trends

Personal experience