Using economic profit as a powerful company valuation tool

A conference organised by Valletta Fund Management

Valletta Fund Management recently organised a conference on "Using Economic Profit as a Powerful Company Valuation Tool". The conference, held at the Hilton, was addressed by John P. Laschenski, a management consultant, accountant and business educator based in Rochester, New York and was attended by a number of distinctive guests from the local financial sector - namely stockbrokers and banks.
In his address, Mr Laschenski combined theoretical analysis and practical techniques, with an emphasis on real-world applications related to companies listed on the Malta Stock Exchange.
Mr Laschenski described how many believe that creating new measures of success in the marketplace is the primary job of today's Chief Executive Officer whilst various factors like earnings, market share, brand recognition and product range can cause the market value added grow up. Mr Laschenski explained that the size of the company's return on invested capital (ROIC) and whether the company's invested capital is growing are the two fundamentals for company's economic growth. In this regard, the strategic goals for any enterprise may be established through appropriate use of the so called economic profit model.
During a discussion about mergers and acquisitions, Mr Laschenski pointed out how nowadays, merger and acquisition activity around the world is very intense and has grown substantially over the last five years. He explained that the financial structure of an acquisition is carried out parallel to the undertaking of a capital project.
Speaking about the objectives of the conference Charles Borg, VFM General Manager, commented, "The event created a forum of discussion for a clear understanding of what really produces shareholder value in today’s business. Moreover, we strongly believe that this conference, the first of its kind in Malta, has been an extremely useful and informative event designed to focus on the issues and trends in equity valuation providing a clear opportunity to gain new insights in this field and how it relates to our business organisations."
The conference discussed and evaluated the use of financial measurement and management systems such as free Cash Flows, Economic Value Added and Economic Profit as well as the use of these cash based measures to evaluate business performance and relate it to stock market performance. Such a forum should generate a better understanding of today's organisations’ best practice in value based management in.
The topics discussed included ‘How managing shareholders value has emerged as the primary job of today’s CEO’, ‘The economic profit or EVA model and the evidence for its validity’ and ‘Using economic profit to run a business: strategic objectives and executive compensation’.
Mr Laschenski creates and leads financial and accounting seminars throughout the United States, Canada, Europe and the Middle East. Before founding his own consulting firm, Mr Laschenski designed and managed the development of computer systems for IBM Corporation and was a financial executive at Xerox Corporation.