Graham vs. Greenblatt (Session 4) Buy some cheap earnings

falling+money Graham vs. Greenblatt (Session 4) Buy some cheap earnings
In our last post we looked at Greenblatt’s use of Return on Capital as a means of identifying quality companies that know how to turn a small investment into a substantial return. In this posting we will look at his next criteria earnings yield.

What is it?

EBIT
enterprise value

What does it tell us?

EBIT is defined as Earning before Interest and Tax, as we discussed in the last posting that works out to the raw income flowing into the company.

Enterprise Value is defined as market capitalization – cash and cash equivalents + preferred stock + debt
bullet Graham vs. Greenblatt (Session 4) Buy some cheap earnings Read More...

Graham vs. Greenblatt (Session 3) Return on Capital

gold+bar Graham vs. Greenblatt (Session 3) Return on CapitalGreenblatt in his book The Little Book that Beats the Market advocated a simple method for attaining substantial stock returns. In this series we are looking at the particulars of this investing theory to both understand why he advocated the elements of this theory and what Benjamin Graham would have thought of the approach that Greenblatt was advocating. The next part in this series looks at Return on Capital or ROC.

What is it?

Earnings Before Interest and Tax (EBIT)
Net Working Capital + Net Fixed Assets

EBIT is a raw calculation of the regular company income excluding the income from irregular or non-reoccurring activities.
bullet Graham vs. Greenblatt (Session 3) Return on Capital Read More...
   

See New Articles First

investing feedburner Subscribe
twitter investor Follow on Twitter

Investment Books

Intelligent Investor
Related Article>
munger
Related Article>
dividend investing
Related Article>
sacred cows
Related Article>
buffettmunger
Related Article>

Investment Quotes

“When you lose, Don’t lose the lesson.”

The Dalai Lama

Questrade

$50 Free Trades & Chance to Win the Professional Trader Course

The author has taken all usual and reasonable precautions to determine that the information contained in this website has been obtained from sources believed to be reliable. However, the market forces underlying investment value are subject to sudden and dramatic changes affecting data availability and information may be available which is not reflected in this website. Consequently, the author makes any warranty as to the accuracy or completeness of information, analysis or views contained in this website or their usefulness or suitability in any particular circumstance. This website should not be relied upon for any investment or portfolio assessment or other transaction. Please consult your Investment Executive directly to review any proposed investment or transaction. The author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this website in contravention of this notice. Copyright 2008.