Value Investing

Value Premium Calculated Using EBIT / EV

By greenbackd

Further to this post Value Badly Lagging Glamour: The Value Premium Is Now A Discount Saj Karsan requested a calculation showing the value premium using EBIT/EV:

This chart shows the average annual value premium calculated using EBIT/ EV (decile 10 — decile 1) from the largest 50 percent of non-financial stocks listed in the US for the period 1999 to present.

value premium

The horizontal red line is the average EBIT/EV value premium for the period at 5.4 percent. 2009 aside, the value premium has been negative since 2007 (although there is a very small premium for the incomplete 2013 year to date). Even so, the magnitude of the return in 2009 means that, in aggregate since 2007, the value premium is still slightly positive.

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