Little Book that Beats the Market
-Good companies (ROIC) at Good prices (E/EV)
- magicformulainvesting.com
- ROIC ~ EBIT/(WC + Fixed Assets)
- Yield ~ EBIT(Market Cap + Debt)
i.e. 2 companies, both with EBIT = $10. A has no debt, B has $50 debt. Price/share = $30.
Yield A = $10/$30 = 1/3
Yield B = $10/($30 + $50) = $1/8
Company A is "cheaper" even at the same "price" and same "earnings" because Company A did not require debt to achieve this.
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