Value Premium Calculated Using EBIT / EV

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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.

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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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My name is Tobias Carlisle. I am the founder and managing member of Eyquem Investment Management LLC, and portfolio manager of Eyquem Fund LP. Eyquem Fund LP pursues a deep value, contrarian, Grahamite investment strategy based on the research featured in Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (hardcover, 288 pages, Wiley Finance, December 26, 2012), and discussed on Greenbackd. I have extensive experience in activist investment, company valuation, public company corporate governance, and mergers and acquisitions law. Prior to founding Eyquem, I was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions I have advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam, ranging in value from $50 million to $2.5 billion. I am a graduate of the University of Queensland in Australia with degrees in law and business (management). Contact me I can be contacted at greenbackd [at] gmail [dot] com. I welcome all feedback. Connect on LinkedIn, where we’re Friends.

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