This article is the third in a four part series that walks readers through how to rate and value a stock. Our third step to gauge the value of a company is to determine its economic earnings.
The second step to gauge the value of a company is to determine the sum of all cash that has been invested in a company over its life without regard to financing form or accounting name. We call this Invested Capital.
Our first step to gauge the value of a company is to determine the true, after-tax cash flows generated by its operations. We call this Net Operating Profit After Tax (NOPAT).