Determining stock prices with valuation models is a good beginning to the investment process. However, professionals will know that it is a beginning and not a complete process. In fact, being myopic with valuation models may mean that one sees the trees but not the forest. Data has to be adjusted for qualitative and accounting issues. More importantly, correct judgments must be made on the company’s outlook. This also clouds back-testing issues. You may hear some organizations who state “we correlated earnings with such and such indicator and there is no correlation.” Again, which earnings? GAAP, non-GAAP, or economic non-GAAP? Were the earnings adjusted to meet the required needs, and were they time-delayed ...

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