Company Models
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Results - Decision Page

The Decision Page offers investors interactive and dynamic valuation analysis tools for all companies in the New Constructs Database. Clients can review the valuation results of multiple forecast scenarios, as well as the impact of those scenarios on the different stock prices.

Company Data Company name, ticker, prior closing stock price
Performance Hurdles Section
see Economic Value Drivers Summary for more detail.
This column lists the names of the key drivers of stock price performance over the relevant time periods:
  1. Stock price: actual split-adjusted stock price
  2. Revenue CAGR: Revenue Compounded Annual Growth Rate
  3. Economic Earnings Margin (Avg.) : average of ROIC minus WACC
  4. GAP (Growth Appreciation Period): see below
Growth Appreciation Period (GAP) The number of years into the future a company earns positive Economic Earnings Margin and/or the period of time that a company's ROIC is expected to exceed its WACC on new investments.
Historical Performance Section
Presents the historical results of each performance hurdle according to:
  1. Last 5 years of available data
  2. Last 3 years of available data
  3. Latest Fiscal Year
Forecast 1 Section (blue) Presents the future results for each performance hurdle that are required to justify the entered stock price as well as prices 50% greater and less than the entered stock price.
Functionality
  1. View the valuation impact of different future performance forecasts
  2. View the performance required to justify different stock prices
  3. The Forecast Page Help enables you to define forcasts according to your specific expectations for Optimistic, Neutral and Pessimistic forecasts.
NOTE: Only the Default forecast has been automatically populated. Users must define the Optimistic, Neutral and Pessimistic forecast before they may be used.
Forecast 2 Section (yellow) Same as Forecast 1. Meant to provide real-time comparison of different financial performance forecasts and their valuation impacts.
Functionality 1. Same as Forecast 1.
Decision Chart Plots the DCF share prices up to and five years past the GAPs generated by Forecasts 1 and 2.
Functionality Automatically refreshes based on selections and changes made in both Forecast 1 and Forecast 2.
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Results - Forecast Page

The Forecast Page shows users the explicit forecasts behind the Default, Optimistic, Neutral and Pessimistic forecasts. The Edit Button on this page enables users to modify forecasts for the Optimistic, Neutral and Pessimistic forecasts.

Select a Forecast to Modify From this drop-down menu, select the Forecast you wish to Edit.
Edit button Clicking this button permits users to edit the selected forecast as per above.
Save button Clicking this button saves and updates the inputs that were modified for the Selected Forecast.
Cancel button Clicking this button reverts inputs for selected forecast to the most recently saved values.
Estimates Time Frames
  1. Historical performance for the past five years:
    • The historical performance provides the relevant context for estimating each of the estimate items.
  2. Future Estimates
    • We break estimates for the next 100 years into 10 buckets.
    • EY 1, EY 2, and EY 3 are buckets for inputting each of the next three individual years.
    • EY 4-5 is the bucket for inputting estimates for the 4th and 5th future years.
    • EY 6-10 is the bucket for inputting estimates for the 6th through the 10th future years.
    • EY 11-15 is the bucket for inputting estimates for the 11th through the 15th future years.
    • EY 16-20 is the bucket for inputting estimates for the 16th through the 20th future years.
    • EY 21-25 is the bucket for inputting estimates for the 21th through the 25th future years.
    • EY 26-50 is the bucket for inputting estimates for the 26th through the 50th future years.
    • EY 51-100 is the bucket for inputting estimates for the 51st through the 100th future years.
Estimate Items
  1. Revenue Growth - drives the Revenue CAGR calculation of the Decision Page.
  2. ROIC forecasts are driven by:
    • NOPBT Margin equals NOPBT/Operating Revenue see NOPAT Page Help Section for more detail
    • Cash Tax Rate equals Cash Operating Taxes/NOPBT - see NOPAT Page for more detail
    • These two items combine to provide the NOPAT Margin which drive NOPAT forecasts based on Revenue Forecasts
    • NWC Delta as % of Rev Delta equals the changes in Net Working Capital as a percent of the changes in Revenue. The results shows how much NWC is required for each incremental $ of revenue. See the Invested Capital Page for more detail.
    • Fixed Assets Delta as % of Op Delta equals the changes in Fixed Assets as a percent of the changes in Revenue. The results shows how much Fixed Capital is required for each incremental $ of revenue. See the Invested Capital Page for more detail.
    • These two items combine to provide the Incremental Capital forecasts which are deducted from NOPAT to calculate Free Cash Flow.
  3. WACC is set on the WACC Review Page as per the Current DCF WACC
  4. Economic Earnings Margin on the Decision Page equal the Average ROIC over the relevant GAP minus the Current DCF WACC.
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Results - Overrides Page

Overrides allow users to input and modify values for important components of the Company Model (see list below). Overrides are a powerful feature that enables users to modify both historical profitability analyses as well as valuation results. We encourage users to utilize this feature and to be mindful of the impact your Overrides have on results throughout the model.

In the Source Review section, the DCF Review page, and the WACC Review page, each line item is delineated as an Override by two icons.

Overridden = marks an item that can be overridden.
Overridable = marks an item that has active overrides in effect.

Overrides Page

On the Overrides page, you activate individual overrides by checking the checkbox to the left of the override name. When you click 'save', the Company Model is regenerated with the selected overrides activated. You can verify that an override is active by accessing the relevant Source Review, DCF, and WACC pages.

Following is a full listing of Overrides available:

NOPAT Overrides
Goodwill Amortization
Employee Stock Option (ESO) Expense
Implied Interest for Present Value of Operating Leases
Net Non Operating Expenses (Income)
Change in Deferred Taxes
Invested Capital Overrides
Excess Cash
Total Reserves
Capitalized Value of Operating Lease Obligations
Accumulated Unrecorded Goodwill
Cumulative Asset Write-Offs After Tax
Accumulated Goodwill Amortization
Accumulated Other Comprehensive Income
Deferred Tax Liability
WACC and DCF Overrides
Weighted Average Cost of Capital (WACC)
Value of Outstanding ESOs After-Tax
Net Funded Status for Pensions
Adjusted Total Debt
Unconsol. Sub Assets (Non-Op)
Minority Interests
Preferred Capital
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Results - DCF Review Page

The DCF Review Page shows users the explicit results of the Default, Optimistic, Neutral and Pessimistic forecasts. New Constructs' dynamic discounted cash flow model calculates a value per share for every forecast horizon between now and the next 100 years. The Value for each year is based on the Cumulative Present Value of Free Cash Flows generated over each time period plus the Present Value of the Terminal Value which equals NOPATT+1 divided by WACC. This Terminal Value calculation assumes no future profit growth. Accordingly, each Value Per Share represents the Value of a given company's stock over 100 different GAPs. For more explanation, see How New Constructs Dynamic Discounted Cash Flow Model works.

Select a Forecast to View From this drop-down menu, select the Forecast you wish to view.
Definitions of Items in order of appearance.
Total Revenues Total Revenues - for more detail see NOPAT Page
Total Revenues Growth Total Revenues Growth - for more detail see NOPAT Page
NOPBT Net Operating Profit Before Tax - for more detail see NOPAT Page
NOPBT Margin NOPBT/Revenues - for more detail see NOPAT Page
Cash Tax Rate Cash Operating Taxes/NOPBT
NOPAT Net Operating Profit After-Tax - for more detail see NOPAT Page
NOPAT Margin NOPAT Margin - for more detail see NOPAT Page
NWC Delta Year over Year change in Net Working Capital - for more detail see Invested Capital Page
Fixed Assets Delta Year over Year change in Total Fixed Assets - for more detail see Invested Capital Page
Incremental Capital NWC Delta plus Fixed Assets Delta
Free Cash Flow NOPAT minus Incremental Capital
Present Value (PV) of FCF FCF/(1+WACC)^Years into the Future
Cumulative PV of FCF Cumulative Present Value of Free Cash Flow
Terminal Value (NOPATT+1) /WACC
PV of Terminal Value Terminal Value/(1+WACC)^Years Into the Future
Corporate Value Cumulative PV of FCF plus PV of Terminal Value
Excess Cash Excess Cash from latest FYE - for more detail see Invested Capital Page
Unconsolidated or Non-Operating Assets Any assets excluded from Invested Capital and whose revenues are excluded from NOPAT
Total Debt Total Debt from latest FYE - for more detail see Invested Capital Page
Preferred Stock Preferred Stock from latest FYE - for more detail see Invested Capital Page
Minority Interest Minority Interest from latest FYE - for more detail see Invested Capital Page
Value of Outstanding ESOs After-Tax Value Owed to Employees as per the currently outstanding Employee Stock Options. All currently outstanding ESOs represent employee's claim to the future cash flows of the company. Additional ESO grants represent future cash costs for which we account in our NOPAT calculation. for more detail see ESO Page.
Net Funded Status for Pensions Deducts the liability for under-funded pension and adds the amount of over-funding. Under/over funded pensions represent liabilities/assets $that decrease/increase the value available to existing shareholders.
Shareholder Value The value of the firm to which current common shareholders may lay claim. This item is equal to the Corporate value plus Excess Cash and the Value of Unconsolidated/Non-operating assets less Total Debt, Preferred Stock, Value of Outstanding ESOs and Minority Interests.
Current Basic Shares Outstanding We divide Shareholder Value by Basic Shares Outstanding because we have already accounted for Outstanding ESOs in our Shareholder Value calculation.
Value Per Share Shareholder Value divided by Basic Shares Outstanding
GAP Growth Appreciation Period
Revenue CAGR Compounded Annual Growth Rate for each GAP
Geo-Mean Economic Earnings Margin The geometric mean for Economic Earnings Margin for each GAP
Geo-Mean NOPAT Margin The geometric mean for NOPAT Margin for each GAP
Geo-Mean Average Invested Capital Turns The geometric mean for Average Invested Capital Turns for each GAP
NOPAT CAGR Compounded Annual Growth Rate for each GAP
Invested Capital CAGR Compounded Annual Growth Rate for each GAP
FCF CAGR Compounded Annual Growth Rate for each GAP
Economic Earnings CAGR Compounded Annual Growth Rate for each GAP
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Results - WACC Review Page

The WACC Review Page shows users the explicit inputs and approach to calculating WACC historically as well as the Current DCF WACC, which is used as the discount fact in our DCF model. For more explanation, see WACC: Definition and Calculation.

Enterprise Value Analysis

At the bottom of the WACC Review Page, we provide a special section Enterprise Value Analysis for analyzing historical and current Enterprise Values.

Definitions of Items in order of appearance.
Special Note
All values are based on the relevant Fiscal Year End ( e.g. 12/31) for each year presented, except the Current DCF WACC. Stock prices are updated daily. Risk-Free Rate, Beta, and Expected Market Return are updated quarterly. All else is updated annually.
WACC Formula: WACC = (Ke)*(E/TC) + (Kd)*(D/TC)+Kp*(P/TC)
Cost of Equity Calculation
Risk-Free 30yr Treasury Risk Free rate based on the 30yr Treasury Bond.
Beta Beta Industry Average as derived by New Constructs
Expected Market Return Adjusted long-term historical average for forward-looking Expected Market Return.
Equity Risk Premium Expected Market Return minus The Risk-Free Rate
Cost of Equity (Ke) Risk Free Rate + (Beta*Equity Risk Remium)
Market Value of Equity (Stock Price*Basic Shares Outstanding) + Value of Outstanding ESOs
Equity/Total Adjusted Market Value (E/TC) Market Value of Equity/(Market Value of Equity + Total Debt + Preferred Equity)
Weighted Cost of Equity Cost of Equity * (Equity/Total Adjusted Market Value)
Cost of Debt Calculation
Risk-Free 30yr Treasury Risk Free rate based on the 30yr Treasury Bond.
Debt Rating S&P long-term Credit Rating on Senior Debt
Debt Spread Spread over the risk free rate assign to each Debt Rating
Marginal Tax Rate For more information see the Income Statement Page
Cost of Debt After-Tax (Kd) (Risk Free Rate + Debt Spread) *(1 - Marginal Tax Rate)
Total Debt Total Debt as from the Invested Capital Page
Debt/Total Adjusted Market Value (D/TC) Total Debt/(Market Value of Equity + Total Debt + Preferred Equity)
Weighted Cost of Debt Cost of Debt * (Debt/Total Adjusted Market Value)
Cost of Preferred Capital
Preferred Dividends From Income Statement
Preferred Capital From Balance Sheet
Cost of Preferred (Kp) Preferred Dividend/Preferred Capital
Preferred/Total Adjusted Market Value (P/TC) Preferred Capital/(Market Value of Equity + Total Debt + Preferred Equity)
Weighted Cost of Preferred Cost of Preferred * (Preferred/Total Adjusted Market Value)
WACC Weighted Cost of (Equity + Debt + Preferred)
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Results - Source Review - Balance Sheet Page

The Balance Sheet Page shows users all the explicit historical values pulled from each individual company's Balance Sheet as provided in every 10K going back to 1998. We use normalized Line Item names to display the actual Balance Sheet line item values to prevent cluttering this view with every line item used over the historical time frame we analyze. New Constructs actually pulls the explicit line item name along with the values for every company. We plan to provide views of this information on an annual basis soon.

Note

Because we normalize line item names, we chose the most common names across all companies. Unfortunately, this process short-changes certain industries such as Financials and Utilities. This problem will be remedied when we add the feature that presents the actual line item names and values for each Fiscal Year for each company.

NOPAT Page Help

Invested Capital Page Help

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Results - Source Review - Income Statement Page

The Income Statement Page shows users all the explicit historical values pulled from each individual company's Income Statement as provided in every 10K going back to 1998. We use normalized Line Item names to display the actual Income Statement line item values to prevent cluttering this view with every line item used over the historical time frame we analyze. New Constructs actually pulls the explicit line item name along with the values for every company. We plan to provide views of this information on an annual basis soon.

Note

Because we normalize line item names, we chose the most common names across all companies. Unfortunately, this process short-changes certain industries such as Financials and Utilities. This problem will be remedied when we add the feature that presents the actual line item names and values for each Fiscal Year for each company.

Cash Flow Statement

The data points we collect from the Cash Flow Statements are listed at the bottom of the Income Statement page.

NOPAT Page Help

Invested Capital Page Help

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Source Review - Adjustments Page

The Adjustments Page shows users all the Adjustments required to calculate a factual NOPAT and Invested Capital. For more information on the calculations and the adjustments to NOPAT and Invested Capital see Invested Capital Definition and Calculation and NOPAT Definition and Calculation. An Explanation of Adjustments for NOPAT and Invested Capital Calculations is provided at the end of this section.

For explanation how certain financial data anomalies affect the calculation of certain adjustments see New Constructs System Reconciliation of Data Anomalies in the Methodology Help Section.

NOPAT Adjustments Impact Analysis - Help

Net Income-GAAP We start with GAAP Net Income and show all the adjustments required to convert GAAP Net Income to NOPAT.
Net Non-Operating Expenses All non-operating expenses minus non-operating income.
Net Non-Operating Expenses After Tax All non-operating expenses minus non-operating income After-Tax.
Net Non-Operating Expenses After-Tax as a % of Revenues % of Revenues of the Net Non-Operating Expenses After-Tax
Change in Deferred Taxes Change in Deferred Taxes as taken from the Cash Flow Statement.
Change in Deferred Taxes as a % of Revenues % of Revenues of the Change in Deferred Taxes
Change in Reserves Change in all Reserves as taken from the LIFO, Loan-Loss and all other Non-Cash Reserves.
Change in Reserves as a % of Revenues % of Revenues of the Change in Reserves
Goodwill Amortization Goodwill Amortization Expense as taken from the Income Statement, Cash Flow Statement or as derived from the change in Accumulated Goodwill Amortization except in the first year of historicals. If companies do not provide relevant Goodwill Amortization Expense in the Income Statement or Cash Flow Statement, we assume that Goodwill Amortization expense in the first year of history is represents the same % of revenue of the year immediately following.
Goodwill Amortization as a % of Revenues % of Revenues of the Goodwill Amortization
Annual Employee Stock Option (ESO) Expense The economic expense attributable to the annual granting of stock options to employees. For more detail on how we calculate the Annual ESO Expense see the ESO Page
ESO Expense as a % of Revenues % of Revenues of the ESO Expenses
ESO Expense After Tax The ESO expense net of taxes.
ESO Expense After-Tax as a % of Revenues % of Revenues of the ESO Expense After-Tax
Interest from Capitalized Operating Leases The implied interest derived from Capitalizing off-balance sheet assets as reported in the Operating Leases section in the company's 10K. For more detail on how we calculate the Interest from Capitalized Operating Leases see the PV Leases Page.
Interest from Capitalized Op Leases as a % of Revenues % of Revenues of the Interest from Capitalized Operating Leases
Interest from Capitalized Op Leases After Tax Interest from Capitalized Op Leases net of taxes.
Interest from Capitalized Op Leases After-Tax as a % of Revenues % of Revenues of the Interest from Capitalized Op Leases After-Tax
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Source Review - Explanation of Adjustments for NOPAT and Invested Capital Calculations

NOPAT Adjustments Explanations

please refer to NOPAT Definition and Calculation for a general explanation of this metric

Net Non-Operating Expenses After Tax Because NOPAT measure the true Operating Profit of a business all non-operating expenses and income are removed. To arrive at the true operating profit after-tax, we also reverse for the tax benefit of non-operating expenses and the tax burden of non-operating income.
Change in Deferred Taxes Increases and decreases in deferred tax represent the difference between the reported income tax provision and what the company actually paid. To assess the true operating profit of the company we increase NOPAT by the amount of the increase in Deferred Taxes and do the opposite for decreases in Deferred Taxes.
Change in Reserves Increases (decreases) in Reserves represent cash additions (subtractions). New Constructs calculation of NOPAT appropriately captures the impact of these changes.
Goodwill Amortization Goodwill Amortization is a non-cash expense. As such, we add it back to calculate NOPAT.
ESO Expense After Tax The granting of employee stock options represents a transfer of value away from existing shareholders to employees. ESOs represent an operating compensation expense that decreases the profits of a company. The dilution of outstanding shares accounts only for exercisable options and does not capture the full economic impact of this granting ESOs. Prior to the adoption of ASC Topic 718, GAAP did not require recognition of ESO expense. Accordingly, we deduct ESO expenses (after accounting for the implied tax benefit of the expense) from our calculation of NOPAT prior to the adoption of ASC Topic 718 and use Basic instead of Diluted Shares Outstanding for all relevant calculations. For more detail on how we calculate the Annual ESO Expense see the ESO Page.

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Invested Capital Adjustments Explanations

please refer to Invested capital Definition and Calculation for a general explanation of this metric

Excess Cash Many companies, especially profitable companies, carry more cash on their balance sheets than is required to sustain their business. For example, Microsoft's business is not capital intensive and the company does not utilize the majority of the cash on its balance sheet. Invested Capital measures the amount of capital required to operate the company's business. Hence, unneeded cash is considered a non-operating asset and is not included in our calculation of Invested Capital. For more information on the calculation of Excess Cash, see the Invested Capital Page.
Total Reserves LIFO Reserves, Loan-Loss Reserves and other Non-Cash Reserves represent cash required for the company to run its business. Hence, we add the value of these reserves to our Invested Capital calculation. For more information, see the Invested Capital Page.
Deferred Tax Liability We consider the long-term portion of unpaid(Deferred) taxes to be an equity equivalent and include it in our calculation of Invested Capital. For more information, see the Invested Capital Page.
PV of Operating Lease Obligations Operating Leases represent the off-balance sheet equivalent of Capital Leases. We calculate the Present Value of all operating lease payments and add the aggregate value to Invested Capital. This approach ensures we are able to perform apples-to-apples comparisons between those companies that utilize Capital Leases and those that utilize Operating Leases. As such, this adjustment prevents use of different accounting policies from undermining your ability to compare the economic performance of different companies. For more information on how this item is calculated, see the PV Leases Page.
Accumulated Unrecorded Goodwill Unrecorded Goodwill equals [(number of shares issued in a Pooling Acquisition * the price of the shares issued) - the book value of the company acquired]. Note that the Pooling Method of Accounting was discarded by the SEC after 2001. Carrying Unrecorded Goodwill in our Invested Capital calculation into perpetuity is consistent with our policyto do the same with purchased or recorded Goodwill. This adjustment ensures we are able to perform apples-to-apples comparisons between those companies that utilized the Pooling Method of Accounting and those that utilized the Purchase Method for acquisitions. As such, this adjustment prevents use of different accounting policies from undermining your ability to compare the economic performance of different companies. For more information, see the Invested Capital Page.
Accumulated Goodwill Amortization Because we increase NOPAT by the amount of Goodwill Amortization, we must also increase Invested Capital by the amount of Accumulated Goodwill Amortization to be consistent in our calculation of ROIC. In addition, we consider Goodwill an investment in future synergies, the value of which does not depreciate over time as do tangible assets. In fact, the longer two merged companies are together, the more they learn about each other and the more likely they are to find additional and/or greater synergies. This fact does not account for the amount of Goodwill in which companies all too often invest. For more information, see the Invested Capital Page.
Cumulative Asset Write-Offs After-Tax Writing down assets permits companies to arbitrarily decrease the carrying value of assets on their balance sheets. These write-offs are a direct deduction to shareholder equity and unfairly reduce the amount of shareholder capital that companies must report artificially boosting ROE. Hence, we add the after-tax value of all write offs to Invested Capital. This adjustment ensures we are able to perform apples-to-apples comparisons between those companies that write-down more assets than others. As such, this adjustment prevents use of different accounting policies from undermining your ability to compare the economic performance of different companies. For more information, see the Invested Capital Page.
Accumulated Other Comprehensive Income FAS 130 and 133 created the Accumulated Other Comprehensive Income (OCI) to capture the impact of Minimum Pension Liability Adjustments, Unrealized Gains/Losses from Investments (incl. Hedging Instruments) and Foreign Currency translation on the Balance Sheet. The components of OCI create often ephemeral gains/losses to be added to the Balance Sheet. In addition, we already capture the impact of over/under funded pensions so keeping OCI in Invested Capital would be double-counting the minimum pension liability. Hence, we deduct For more information, see the Invested Capital Page.

More detail on FAS 130 and 133:

FAS 130 defines the required presentation of comprehensive income as a new basic financial statement, rather than an item of disclosure. Paragraph 26 of FAS 130 requires presentation of the components of the accumulated balance of other comprehensive income items on the face of the financial statements or in footnotes.

FASB Statement 133, Accounting for Derivative Instruments and Hedging Activities, is effective for financial statements for all fiscal quarters of fiscal years beginning after June 15, 1999. The transition adjustments resulting from adoption must be recognized in income and other comprehensive income (stockholders' equity), as appropriate, as a cumulative effect of an accounting change. FAS 133 supersedes FAS 80, Accounting for Futures Contracts, FAS 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, and FAS 119, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments, and amends the hedgingsections of FAS 52, Foreign Currency Translation to permit special accounting for a hedge of a foreign currency transaction with a derivative.
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Source Review - NOPAT Page

The NOPAT page presents users with New Constructs' calculation of NOPAT from both the Operating Approach and the Financing Approach for at least five years of history. NOPAT represents the after-tax operating cash generated by the business, excluding non-recurring losses and gains, financing costs, and goodwill amortization and including the compensation cost of employee stock options (ESOs). This page details exactly how we arrive at our NOPAT values. For a general overview of how we calculate NOPAT please review: New Constructs' System Reconciliation of Data Anomalies in the Methodology Help Section.

At the bottom of the NOPAT page, we offer the following special sections:

Return on Invested Capital Analysis - presents historical returns on invested capital as well as the prime components of ROIC.

Economic Earnings Analysis - presents historical economic earnings as well as the key components of economic earnings.

Economic Book Value and PVGO Analysis- presents economic book value and PVGO as well as the key components of these metrics.

For explanation how certain financial data anomalies affect the calculation of certain NOPAT adjustments, see New Constructs System Reconciliation of Data Anomalies in the Methodology Help Section.

For information on how we calculate Economic Earnings, ROIC and other Economic Value Drivers, please see:Economic Value Drivers Summary.

For information on how we calculate Average Invested Capital Turns and the Invested Capital Delta as 1 % of Revenue Delta please see the Invested Capital Efficiency section of the Invested Capital Help Page.

For information on how we calculate Economic Book Value and PVGO, please see the Valuation Financial Statements Summary Help Page.

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Source Review - ESO Page

The ESO page provides a step-by-step overview of how we capture two important economic impacts of granting Employee Stock Options (ESOs). We refer you to this page for more information on:

  1. Annual compensation expense equal to the economic value imparted to employees via stock option grants.
  2. Liability of all outstanding ESOs on the future cash flows of the business.
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Source Review - InvestedCapital Page

The Invested Capital page presents users with New Constructs' calculation of Invested Capital from both the Operating Approach and the Financing Approach for at least five years of history. Invested Capital represents the sum of all cash that has been invested in a company over its life without regard to financing form or accounting name. It is the total of investments in the business from which operating revenue is derived. This page details exactly how we arrive at our Invested Capital values. For a general overview of how we calculate Invested Capital please review: Invested Capital Definition and Calculation. For detailed information on the adjustments we make to reported financial statements in order to calculate Invested Capital, please see: Adjustments Page-Help.

For explanation how certain financial data anomalies affect the calculation of certain Invested Capital adjustments, see New Constructs System Reconciliation of Data Anomalies in the Methodology Help Section.

For information on how we calculate Economic Earnings, ROIC and other Economic Value Drivers, please see: Economic Value Drivers Summary.

For information on how we calculate Economic Book Value and PVGO, please see the Valuation Measures Help Page

For information on how we calculate Average Invested Capital Turns and the Invested Capital Delta as a % of Revenue Delta please see the Invested Capital Efficiency Section below.


Invested Capital Efficiency

Net Working Capital Delta as % of Revenue Delta Equals the annual change in New Working Capital divided by the annual change in Total Operating Revenue.
Fixed Assets Delta as % of Revenue Delta Equals the annual change in Fixed Assets divided by the annual change in Total Operating Revenue.
Invested Capital Delta as % of Revenue Delta Equals the annual change in Invested Capital divided by the annual change in Total Operating Revenue.
Fixed Assets Turns Equals Total Operating Revenue divided by Fixed Assets
Average Invested Capital Turns Equals Total Operating Revenue divided by Average Invested Capital
Net Working Capital Growth Equals the annual growth in Net Working Capital
Fixed Assets Growth Equals the annual growth in Fixed Assets
Invested Capital Growth Equals the annual growth in Invested Capital
Net Working Capital Delta Equals the annual change in New Working Capital
Fixed Assets Delta Equals the annual change in Fixed Assets
Invested Capital Delta Equals the annual change in Invested Capital
Invested Capital Delta
Accounts Receivable Turnover Equals Total Operating Revenue divided by Accounts Receivable
Days Revenue Outstanding Equals 365 divided by Accounts Receivable Turnover
Inventory Turnover Equals Total Cost of Revenue divided by Inventory
Days in Inventory Equals 365 divided by Inventory Turnover
Accounts Payable Turnover Equals Total Operating Revenue divided by Accounts Payable
Days in Accounts Payable Equals 365 divided by Accounts Payable Turnover
Deferred Revenue Turnover Equals Total Operating Revenue divided by Deferred Revenue
Days in Deferred Revenue Equals 365 divided by Deferred Revenue Turnover
Cash Conversion Cycle Equals Days Revenue Outstanding + Days in Inventory Accounts Payable Turnover Days in Deferred Revenue.
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Source Review - PV Leases Page

The PV Leases page provides a step-by-step overview of how we convert off-balance sheet operating leases to on balance sheet liabilities. We refer you to this page for more information on:

  1. Implied interest expense and its impact on NOPAT.
  2. Aggregate present value of future lease payments and this hidden asset's impact on Invested Capital.
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Data Sources

There are several sources for the data inputs required to develop Company Models. They are divided into two categories:

  1. Historical Data
    1. 10-K filings are the primary sources, and provide all the information required to perform historical analyses in our Company Models. Note that New Constructs pulls critical information from all Financial Statements in addition to the Notes to Financial Statements and Management's Discussion and Analysis section of 10Ks and 10Qs. Indeed, the Notes to Financial Statements and Management's Discussion and Analysis provided the information required to convert accounting results into true economic results.
    2. Credit Ratings are provided by S&P.
    3. Stock prices data come from Commodity Systems, Inc. (CSI).
  2. Forecast Data
    1. The Default Forecast is created by New Constructs analysts to provide the most useful results for clients.
    2. The Default Forecast estimates are derived from analysis of historical performance and historical trends for each company. For every company, long-term (26 years and beyond) Revenue Growth estimates revert to a mean of 6.5%, which equals the average nominal GDP growth rate since 1929. Other estimates (including pre-tax profit margin, tax rates and capital requirements) are usually held constant over the entire forecast period.
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