Valuation Model | Research Roundup
Weekly Research
PRV
The PRV framework is an internal model that translates underlying Fundamentals into metrics (Profitability, Risk, Value) that can be ranked and then compared relative to the broader market or intra-industry.
To be clear, PRV is not a black box ranking system. PRV systematically links company fundamentals and market values to economic metrics and the resulting score is a percentile rank. In other words, a company with a PRV rank of 80 is in the 80th percentile in its industry with respect to its underlying economics relative to the price of the stock in the market. Higher PRV is better. When fundamentals exceed valuation, the overall PRV ranking will move higher.
HEAT Map
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 y-axis is our measure of Quality, where the higher the score, the higher the company’s Quality or Risk-Adjusted Profitability. 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.
Names in the News: XYZ & BKW
This week we assess two “High Quality and Cheap” names that have been upgraded in the PVA framework. We first look at Block Inc (XZY, rated Buy) - led by cheap Valuations after the recent selloff and strong Risk-Adjusted Profitability. Next we look at BKW AG (BKW SW, Rated Buy) - showing strong Quality (P-R) and favourable Valuation levels.
European Equities: Where to Out Your Money?
In a week where we have seen Germany’s landmark spending spree announced, we looked at where opportunities exist beyond the already overheated space of Defense. The macro landscape has continued to evolve with the view on the accelerated growth perspective and an economic profit perspective as powerful catalysts for the markets.
U.K. Mid Caps: Attractive Opportunities
To get a broader view of the overall U.K. equity market, the PVA framework Margin (economic profitability) is calculated and reads -320bps below the levels seen prior to 2024 - primarily as a result of significant deterioration in Capital intensity with negative Sales growth (Trailing Four Quarters). Thus far into 2025, PVA Margin has stabilised around +1.8%, primarily supported by EBITDA Margin strength.
Industry Snapshot: Global Passenger Airlines
The industry’s aggregate level of economic Profitability is marginally positive at 0.2%, having remained pressured since peaking out at a 30-year high of 2% in early 2024, with the industry historically struggling to cover its cost of capital. PVA Momentum (growth) has deteriorated to a 10-year low of -1.8%, while embedded growth expectations have turned positive since mid-2024, as investors price in potential bottoming in PVA Profitability.
PS: Please let me know if you find the above of value. Should there be interest, I will be happy to provide an information package of the reports (between 5 to 10), on a weekly basis, for a heavily reduced price.
