How to tell if the investment advisor or security analyst you speak to is “worth a hill of beans.”
Ask the following 3 questions:
1-Explain, in detail, once you’ve estimated the entity’s free cash flows, how you arrive at the discount rate?
HINT: It’s not what you learned in grad school or the CFA exam.
2-Explain, again in detail, all of the adjustments you make to the published financial statements, to arrive at an estimate of free cash flow?
HINT: Lots of adjustments are required.
3-How do you define return on invested capital?
HINT: We’re looking for cash on cash.
For the real answers, see “Security Valuation and Risk Analysis” or call CT Capital LLC