Value Augmentation

Value Impact

The Value Impact Module assists in analyzing the impact of change in Value Drivers on Shareholder Value thereby:

  • Enabling Users to make a Comparable Value Impact Analysis of Value Drivers on Shareholder Value
  • Computing ‘What if Analysis’ on two Value Drivers and Viewing Shareholder Value through a combination of two Value Drivers in a Shareholder Value Matrix
  • Computing ‘What if Analysis’ through a combination of Eight Value Drivers and being able to view Shareholder Value in the Value Driver Impact Section

Please read our Valuation FAQs to learn more about Value impact under Value Augmentation Module.

Share Buyback

The Share Buyback Module assists the User in determining the Pre and Post Buyback Economic Value per share and evaluating a Share Buyback Program by Companies.

There are primarily four reasons why companies buy back their shares:

  • When the stock market is valuing the Company way below its Intrinsic or Economic Value
  • When there is no Value Augmenting or Investment Opportunity available
  • To tax-efficiently return excess cash to the Shareholders
  • To increase Financial Leverage, reducing its Cost of Capital

How does one evaluate a Share Buyback Program?

The following steps illustrate how to evaluate a Share Buyback Program:

  • Determine the Economic Value of the Company and Economic Value per share
  • Compare the Value arriving above with the current Market Capitalization to determine the extent of under Valuation
  • Define the Share Buyback program, Number of Shares and Buyback price per share
  • Build the buyback program in the Model and compute the Economic Value per share post buyback and compare with Economic Value pre buyback per share

Please read our Valuation FAQs to learn more about the share Buyback Module under Value Augmentation Module.

Economic Breakeven Margin

This Module lets you compute the Economic Breakeven Margin for Company/Businesses. Economic Breakeven Margin (EBM) is the Minimum Operating Profit Margin a business needs to attain in any period to Maintain Shareholder Value for that period.

The genesis of Economic Breakeven Margin (EBM) is when a business will need to earn exactly the minimum acceptable rate of return that is equal to its Cost of Capital. In other words, any returns below its Economic Break-Even Margin will not give the desired returns to its investors. This means, that the Economic Breakeven Margin is the minimum Operating Profit Margin a business needs to attain in any period to maintain Shareholder Value for that period.

Please read our Valuation FAQs to learn more about Economic Breakeven Margin under Value Augmentation Module.