Valuation by McKinsey's Posts

@valuation08/14/2023

Long-term revenue growth— particularly organic revenue growth— is the most important driver of shareholder returns for companies with high returns on capital.

Valuation by McKinsey

@valuation08/11/2023

Markets do a great job with public information, but markets are not omniscient. Markets cannot price information they do not have.

Valuation by McKinsey

@valuation08/11/2023

Investors do not know as much about a company as its managers do. Investors have only a company's published financial results and their own assessment of the quality and integrity of its management team. For large companies, it's difficult even for insiders to know how financial results are generated.

Example: $BN, (@seafarerinvestor wrote about Brookfield recently) which has a quite complicated structure. That's not to say its a bad company, or even that anything nefarious is going on inside the company. But just that the more complicated a company gets, the more investors have to assume that they can't possibly know all the material information about the company.

Markets cannot price information they do not have.

+ 5 comments

Valuation by McKinsey

@valuation08/09/2023

Creating value cannot be limited to simply maximizing today's share price. Rather, the evidence points to a better objective: maximizing a company's collective value to its shareholders, now and in the future.

Dave Ahern

@ifb_podcast08/09/2023

Great saying and what we should love for in every management team.

+ 7 comments

Valuation by McKinsey

@valuation08/08/2023

Companies that grow and earn a return on capital that exceeds their cost of capital create value.

Rico

@heyrico08/08/2023

yes - what companies are you most interested in right now?

+ 1 comment

Valuation by McKinsey

@valuation08/07/2023

Two core principles of value creation:

1) Return on invested capital and growth drives cashflow, which in turn drives value

2) Anything that doesn't increase cash flow doesn't create value (unless it reduces risk)

Valuabl

@valuabl08/08/2023

Would not a reduction in the real risk free rate increase value?

+ 8 comments

Valuation by McKinsey

@valuation08/04/2023

"Apple sees third straight quarter of falling sales" 🤦‍♂️

$AAPL shares over the long term:

Think about value from a long term perspective.

Walter Neehra

@wneehra08/04/2023

If Apple wasn't expanding overseas, they would have a larger drop.

+ 19 comments

Valuation by McKinsey

@valuation08/04/2023

The best managers:

Don't skimp on safety
Don't make value-destroying decisions just because their peers are doing so
Don't use accounting or financial gimmicks to boost short-term profits

Such actions undermine the interests of all stakeholders, including shareholders.

They are the antithesis of value creation.

Rico

@heyrico08/04/2023

what makes you bring up safety?

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Valuation by McKinsey

@valuation08/03/2023

Creating shareholder value and maximizing short-term profits are two different things.

Companies that conflate the two often put both shareholder value and stakeholder interests at risk.

Valuation by McKinsey

@valuation08/03/2023

Public confidence in large corporations

An annual Gallup poll in the United States showed that the percentage of respondents with little or no confidence in big businesses increased from 27% in 1997 to 34% in 2019.

And those with "a great deal" or "quite a lot" of confidence in big businesses decreased by five percentage points over that period, from 28% to 23%.

That number has continued to fall— 18% in 2021, and a new low of 14% in 2022.

Conversely, those with "a great deal" or "quite a lot" of confidence in small businesses increased by five percentage points over the same period (from 63% in 1997 in to 68% in 2022.)

Valuation by McKinsey

@valuation08/03/2023

Source: https://news.gallup.com/poll/394283/confidence-institutions-down-average-new-low.aspx

+ 1 comment

Valuation by McKinsey

@valuation08/02/2023

Managers should focus on long-term value creation for current and future shareholders, not just some of today's shareholders looking for an immediate pop in the share price