Business-valuation

Many of the concepts in this book have been described and used by successful investors such as Graham in the 30s, Buffett's adaptation of Graham's ideas in the 70s and 80s, and the more recent breed of Intrinsic Value-driven investors who garner wide respect today. New terms are introduced with great fanfare when they often are simple rearrangements of well-known formulas (taking the inverse of a ratio somehow gives you a radically new insight?). It seemed to me that the major contribution of the author is a new set of acronyms.

Claims about how failing companies turned around into successes because they adopted EVA are not sufficiently supported. Those turnarounds could have happened for any of many other reasons. The claims would be believable if they were well supported with facts and deeper analysis. As they are, they detract from the overall quality of the book and raise questions about other claims made in it. At times the author's tone is condescending, as if we can all assume his statements don't need proof!!

The book could function as a fair reference but as most other reviewers have noted, there is no index, and the table of contents is about half a page! This is particularly difficult because the discussions of important concepts are somewhat spread about in the book.

On the positive side, the author's focus on return on capital is good and the reasoning well stated and easy to understand. By the same token, his discussions of what provides true value to the investor (and business manager) is good. But these are not very original. Either the book should have been about one-fourth as long, or the examples the author used to justify EVA should have been much more thoroughly developed.

Stewart has crafted an engaging treatment of Economic Value Added (EVA) which is accessible to both financial professionals and "lay-investors" alike. The material is highly readable and the case examples serve well to illustrate important concepts. (One criticism: Stewart should receive 40 lashes with a wet noodle for failing to provide an index in an 800 page quasi-academic book).

EVA was Stewart's contribution (in 1991) to the Shareholder Value framework originally introduced by Alfred Rappaport of Northwestern University. This theoretical framework emphasizes the imperative of adding shareholder value via the undertaking of specific financial and investment decisions at the corporate level and measuring that value with a metric similar to discounted cash flow analysis. EVA is Stern-Stewart's metric.

After reading the Motley Fools rave review above, I would issue one caveat to all of those "fools" who think they have found the holy grail to selecting winning stocks: EVA has been around for a long time (the theoretical work precedes THE QUEST FOR VALUE by decades) and is well-integrated into investment management methodologies. There have been several studies which demonstrate that selecting stocks based on EVA or even changes in EVA will not produce excessive returns for investors (See Damodaran). Thus, the real "value" of THE QUEST FOR VALUE for private investors is to focus attention on the importance of economic measures of value and to point out the limitations of accounting valuation measures like earnings and earnings growth.

In not possessing a Finance or Accounting background, I have found it extrememly difficult to find a book that can guide me from the very basics of corporate valuation through to the complexities inevitable in any such subject.

However I would urge any potential customer (either financially astute or a beginner like myself) who is genuinely interested in Value, to look no further than "The Quest for Value".

The key resides in the style (fully informative yet at times conversational / humuorous), the content (rich in depth and explanation) and finally the extensive case studies and "war stories" that bring Valuation fully to life.

You dont have to be an accountant or corporate finance practioner to understand and apply the fundamental principles of EVA - in fact as the author sometimes alludes to, not possessing this background is perhaps a distinct advantage.

Investing in this Quest with Stern Stewart as my guide has helped me enormously.

A much sought after text. Not designed for the mainstream audience. A Novice might be better served with a more fundamental book.

I purchased as much material as I could to help me through the appraisal certification exams, especially so to help me through the books I had to buy! It semed that I kept getting deeper and deeper with each book I purchased, the reviewed book included. I then saw one of my classmate's book on the HP12C, written by a Mr. John A. Tirone from Michigan. I purchased this book and used it to supplement the calculations in Mr. Fisher's questions and answers book as well as his Income Property Appraisal book.
The Tirone HP12C book was clear, comprehensive, and as said by others who have commented on Mr. Tirone's books, I was able to call him with questions on how to solve various income capitalization problems and also on how to fine tune my understanding of the Hewlett packard HP12C financial calculator. To my thinking, every appraisal text I have seen is deficient in assisting us students with the calculations on the HP finance calculators. Mr. Tirone's book and his giving no-charge approach to supporting his books and the topic are essentially lifesavers for most of us.

I used Professional real Estate Propblem Solving using the HP 12C to get me through this confusing book as well as help me get through "G1" and "G2" appraisal's computations materials. What stumped me was the lack of clarity in the Fihser Tosh book as far as computations. for coverage of the HP12C it was a lifesaver to have Mr. Tirone's HP-12C real estate book. Mr. Tirone was helpful as several in our class called him for help while trying to absorb the confusing aspects of the Fisher/Tosh book. Mr. Tirone should write a book like Questions and Answers... or team up with the likes of the authors of the reviewed book.
One example in the Tosh book shows a calculation using a terminal value-sales price of $10,000 when it should be $100,000. This gave us fits and I could not figure the problem out until I called Mr. Tirone and he showed us how to do the problem.

I was nervous before this test and I went through and answered every question in the book. The actual test seemed to ask significantly different questions. The result, however, was I passed with over 90 percent. Can you argue with that? It must have helped.

Abrams adds an important element of rigor that is sorely lacking among most valuation professionals.

This text is an excellent addition to the business valuation literature. The author explores a wide variety of approaches with new methods that are easy to follow. A tremendous amount of work went into the preparation of this book and it is very well written. There is a chapter on startup companies that is especially interesting to me.

If you are at all interested in the income method for valuing businesses, I would strongly encourage you to buy this book. In a review on the back cover of the text, Shannon Pratt strongly recommends the book because the author presents "a scholarly summary of past research, new empirical research of his own, and his conclusions".

My only criticism and surprise is the lack of use of Monte Carlo simulation in these models, which is surprising to me considering how statistically focused the author is and how easy simulation is to learn and employ. Also, the use of real options for valuing startups is extremely important but the author does acknowledge this subject is beyond the scope of his book. Extremely well done and the author should be proud of producing work of this caliber. I'm looking forward to future editions and other books by Jay B. Abrams.

As a Finance MBA, this book is recommended. Why? First of all, this is a practical book that would show us how to assess and forecast the business and cash flow. Furthermore, step-by-step approach is helpful in understanding valuation of privately held firms.