FAQs

Questions and Answers about Valuation Technologies Services

First, what are the basic valuation methods?

Managers use technical methods, based primarily on price movements, and fundamental methods, based upon accounting information. Expectational methods depend upon publicly disclosed analysts expectations. Some of the technical methods look price movement relative to the market as a whole, or the price movements of the company's sector. Fundamental methods depend upon reported dividends, earnings, cash flow, re-investment of earnings, or other accounting items.

How do we compute the valuation for your company?

We use analysis data and software provided by BARRA, the leading provider of investment analytics. Each month we compute each valuation model for about 8000 U.S. traded companies. For example, we compute Price Earnings ratio, using latest reported earnings, and price as of the end of the previous month. We then compute the average PE over all companies, and determine how far above or below the overall PE average is your company. Based upon the history of this valuation variable, we estimated the extraordinary return expected due to PE differing from average. From this extraordinary return, we then compute today's fair price for your company. We then perform the same calculation for all the other valuation models.

More Details on Valuation Methods.

How do we know which methods are used by a manager?

Just as we compute the value of your company, using the 14 different models, we compute the value of all 8000 U.S. companies. Using Vickers portfolio holdings data, we know which securities are held in about 7,000 institutional portfolios. We then compute the average and spread in valuation, for securities held in each portfolio. From this, we can determine which models are important to a manager, and which are incidental. We similarly characterize the securities recently bought or sold, telling us which valuation models best describe the kind of security transacted.

How does this information help in your job?

This information helps you:

• Understand different investor perceptions and preferences- why one investor is buying while another is selling.
• Communicate with potential investors in their language.
• Know when each institution is most likely to purchase (or sell) your company's stock.
• Understand the factors that most influence the valuation of your company.
• Make more efficient use of management time and Investor Relations resources.
• Bottom line, improve the trading quality and shareholder return of your stock.