Summary |
This book is about understanding, but it is primarily about doing. Concepts and framework are only important if they lead to analysis tools. Each chapter of the book ends with a list of key concepts, but also with the analyst’s toolkit that summarizes the key analysis tools in the chapter. By the end of the book, you will have a complete set of tools for practical analysis.
The tools in the book are those that a security analyst outside the firm uses to advise clients about investing in the firm.
This book focuses on earnings forecasting and the methods for converting earnings forecasts to a valuation. The reason will become clear as you proceed through the book: earnings, appropriately measured, give a better indication of the value generation in a business, so the analysis of earnings prospects leads to a firmer understanding of fundamental value. Graham and Dodd and the fundamental analysts of earlier generations emphasized “earnings power.” This book maintains that focus, but in a way that is consistent with the principles of modern finance.
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