Turning investment theory into a successful value-oriented equity strategy

WHAT is "value"? This is a pressing question for investors: Turning investment theory into a successful value-oriented equity strategy has proved challenging over the last decade.

Tim Koller, Marc Goedhart, and David Wessels set out the core principles of valuation and offer a step-by-step guide to measuring the value of a company in the seventh edition of Valuation. The new edition (the first of which was published in 1990) also addresses three factors challenging many value strategies today: the rising proportion of investments in intangible assets, the network effects enjoyed by dominant technology companies, and incorporating an environmental, social, and governance (ESG) lens in assessing value.

The core principles of business valuation are general economic rules that apply in all market conditions. The guiding principle is simple: "Companies that grow and earn a return on capital that exceeds their cost of capital create value."