Today we had a lecture of Tim Koller, partner at McKinsey's New York office and publisher of the book "Valuation: Measuring and Managing the Value of Companies" at my university.He explained that based on his extensive research, every question of company valuation can be narrowed down to one single formula: A company's value mainly depends on it's organic growth rate and the return on invested capital. Simplistic? Well, according to Koller's data, reality proofs the concept (at least the data he presented :-)).
In my opinion, this can only be one side of the coin, because today financial markets also seem to follow other "laws": end-of-year rallies, patterns following analyses of technical investors (the ones drawing all those funny curves into stock charts) and of course the patterns described by behavioural finance.
Well, even if Koller's approach does not represent the whole truth, it is still a valuable concept and a must-know for every semi-professional investor.
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