Prof. Hanke and colleagues at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise developed a method and metric for the valuation of companies that trade on organized exchanges. Their analytical approach begins by manually constructing a company’s balance sheet and income statement from the past five years (or more) using primary data filed with the Securities and Exchange Commission (SEC). These data are used to develop a discounted cash flow model for a company via our proprietary Discounted Cash Flow Methodology (P-DCF).
Monte Carlo simulations are used to generate distributions of a company’s prospective cash flows and to determine the probabilities that its share price will move up or down. Proxy statements are analyzed to determine if management is incentivized to implement policies that will enhance shareholder value and move a company’s share price in the direction suggested by the probabilities determined by the Monte Carlo simulation exercises.