Our PRV Model is an established standard in measuring, analysing, projecting, and valuing a firm’s underlying economic profit rather than its accounting profit. With coverage of 21,000 public companies, this solution enables investors to measure, analyse, and value corporate performance and generate informed investing decisions.
Screening & Idea Generation: Use the PRV reports to narrow the universe of investable ideas to those that are likely to outperform using an objective investment framework.
Single / Multiple Stock Analysis: Analyse the overall PRV profitability of a company and value the company with unique metrics.
Portfolio Analysis: View a fund’s exposure to PRV relative to a benchmark.
The weekly research report’s allow investors to parse through thousands of companies globally with comparable accounting adjustments to drive informed investment decision-making on a systematic basis.
Each week we produce 5-7 timely and actionable reports to highlight key themes, trends, and opportunities from the framework. These reports are aggregated into our Weekly Roundup and sent to clients with priority. Reports can be accessed through this publication, which we will use to build our research catalogue to allow for a historical perspective and point-in-time reviews.
UNDERSTANDING A COMPANY IN THE PRV FRAMEWORK
PRV Margin (red line): Above (below) zero = company achieving better (worse) than cost of capital. Increasing (decreasing) PRV Margin indicates a company has improving (declining) operating profit and/or getting more (less) efficient with assets.
PRV Momentum (blue line): Measures incremental growth in economic value add. Positive (negative) PRV Momentum indicates the company is generating (destroying) incremental value.
PRV Shock (slope of blue line): Measure of acceleration (deceleration) of PRV Momentum; critical for determining Inflection points in a business model.
DRIVERS OF PRV
The three drivers of PRV are EBITDA Margin, Capital Intensity, and sales growth.
EBITDA Margin (blue line) excludes rent expense, Ad & Promo expense, and R&D expense (which are all capitalised).
Capital Intensity = working capital, net PP&E, and intangibles (including capitalised Ad & Promo and R&D), assessed a charge at the cost of capital and scaled to sales. Declining (increasing) Productive Capital charges (red line) = higher (lower) asset efficiency.
The gray shaded areas represent year-over-year sales growth.
HEAT MAP PRIMER
The beauty of the HEAT Map is the visual trade-off between Quality and Valuation: companies in the favourable (blue) area offer higher quality and/or cheaper valuation than those in the unfavourable (red) area. The upper left area tends to contain growth names while the bottom right area tends to be the value plays.
The y-axis is our measure of Quality where the higher the score, the higher the company’s Quality or Risk Adjusted Profitability is. This is a composite score including Level and Trend of Profitability (P1 and P2) as well as Volatility and Vulnerability (R1 and R2).
The x-axis is our measure of Valuation which includes Wealth Ratios and Wealth Multiples (V1 and V2). This axis is plotted in reverse, so the most expensive stocks (highest V scores) are to the left and the cheapest V scores are plotted to the right.
BRING THE PRV FRAMEWORK INTO YOUR INVESTMENT WORKFLOW
Our Valuation Model provides investors with a differentiated approach to the investment decision process.
SUPERIOR TO TRADITIONAL MEASURES OF PROFIT: PRV cuts through accounting distortions and charges for the use of capital.
STYLE AGNOSTIC: Provides an unbiased view of Quality, Value, and Growth investment opportunities.
LEADING INDICATORS: PRV Metrics provide information that can be tied to future share price performance.
CONSISTENT, TRANSPARENT FRAMEWORK: Comparable across “all” companies, industries, and countries.
GLOBAL COVERAGE: Coverage spans 21,000 companies globally, with historical data going back two decades.
Through leading research and analytics, our Valuation Model gives investors insight into factor performance, themes, and other observations within a company or industry - delivering a simple and transparent model and a measure of true valuation for value and growth investors.
