|
 The
PRVit system is
Stem Stewart's proprietary Performance, Risk, and Valuation
investment technology system.
It is a purely quantitative,
EVA-based stock rating and investment
screening system. PRVit is derived from a cross-sectional and time
series statistical analysis of the financial results of all Russell 3000
companies that is updated monthly. It shows how a company compares to
its sector peers and the market universe in terms of its operating
performance, risk, and key valuation multiples.
PRVit
brings together the three factors of:
• performance,
• risk, and
• valuation
and develops an overall index of investment timeliness by
computing a company's risk adjusted performance potential per unit of
valuation (or in symbols, by taking its P score less its R score and
dividing by its V score).
In effect, the PRVit score computes a
company's intrinsic MVA in the numerator
(based on its risk-adjusted potential to drive profitable EVA growth),
and divides that by a representation of its actual MVA in the
denominator.
It effectively compares the performance, risk and valuation tradeoffs
evident within each company against the market universe of such
tradeoffs to
position a company on a relative valuation scale.
The resulting overall PRVit-score -
which runs from 0 to 100 - indicates the company's relative
attractiveness as compared to the Russell 3000. A PRVit score of 50 thus
indicates a fair balance among all three factors, and a seeming parity
between the firm's intrinsic value and its traded value, given
current market conditions. A high score on the other hand - in the range
of 67 to 100 - indicates an investor can acquire a considerable amount
of valuable performance potential for a reasonable valuation price, and
thus the stock may have stored up the potential to outperform the market
if past trends are sustained. A low score, say from 0 to 33, suggests
the company's market value is aggressive compared to past performance
trends, and without a good reason to expect a significant reversal an
investor should avoid buying the shares as such companies are deemed
likely to under-perform the market.
At the heart of PRVit are 12 carefully
selected, precisely computed and exhaustively tested indicators that
collectively depict the essence of corporate performance, risk, and
valuation as in the figure:
Compare with PRVit: EVA
| CFROI | MVA |
RAROC |
Economic Margin
More management models
|
