CHAPTER 2
Equity Analysis Using Traditional and Value-Based Metrics
James L. Grant, Ph.D.
JLG Research and Professor of FinanceUniversity of Massachusetts–Boston
Frank J. Fabozzi, Ph.D., CFA, CPA
Professor of FinanceEDHEC Business School
In this chapter, traditional metrics and value-based metrics are explained with the goal of showing their joint role in equity fundamental analysis and securities valuation. After reviewing the relevant metrics, we apply traditional and value-based metrics analyses to illustrate the benefits of using a synthesized approach to equity analysis in distinguishing “good” companies, which can be potential buy opportunities, from “bad,” risky, or troubled companies, which can be potential sell or short-sell opportunities.
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