Economic Value Statements (EVS) are a product of an empirically-based process to better explain how corporate stock prices are influenced by corporate strategies and strategic assets. They are based on an extensive and growing knowledge base designed to help senior management and sophisticated investors deal with and better explain the factors underlying the intrinsic value of a stock.

• When used by senior management, they help explain the stock prices and value-creating strategies to both analysts and business unit teams. The result is better communication and management that builds on and goes beyond the popular concepts of EVS, Balanced Scorecard and/or the latest management fad.
• When used by sophisticated investors and analysts, they shed light and insight on the future cash flow, economic value and/or earnings of a portfolio company or acquisition candidate. They explain the gap between GAAP accounting and underlying market value in a disciplined reality-checking way.

Economic Value Statements foster better communication, insight and accelerated learning of management and investment teams of strategies that produce value. They provide a reality check on discounted cash flow models by evaluating and systematically considering the strategic factors that produce returns above or below a corporation's cost of capital in an empirically-determined way.

Value Statements build on our extensive business strategy and stock price models by quantifying strategic assets such as:

• Asset Values and Scale (gross investment)
• Market position (relative market share, relative price)
• Product quality position (relative product and service quality, reputation, relative cost)
• Productivity (value added per employee, etc.)
• Negotiating position (investment intensity, capacity utilization, market power of buyers vs. sellers)
• Growth prospects (growth of old and new served market)
• Financial-market favor (above-par portion of P/B multiple)

The result is a better understanding of how strategic assets and organizational effectiveness contribute to stock prices that are above or below book value and a way to balance conflicting investment opportunities.