📊 Example 6: Company C vs. Company A – CFROA vs. Market Value Equivalent
📌 Companies:
• Company C – Strong CFROA, Lower Market Value Equivalent
• Company A – Negative CFROA, Higher Market Value Equivalent
📌 Period: Last 3 Years (2022-2024)
📌 Metric: CFROA vs. Market Value Equivalent
⸻
🔹 How Does the Market Value Cashflow?
Market Value Equivalent is a way to compare a company’s cashflow returns (CFROA) to the valuation assigned by the market.
📊 3-Year Average CFROA vs. Market Value Equivalent:
✔ Company C: CFROA 40%, Market Value Equivalent 15%
❌ Company A: CFROA -8%, Market Value Equivalent 17%
📌 Key Insight: Company C generates strong cashflow but has a lower market valuation, while Company A generates negative cashflow but is valued higher by the market.
⸻
🔎 What This Tells Us About Market Perception
📌 1️⃣ Company C is Highly Effective in Generating Cash but Has a Lower Valuation
• CFROA (40%) is far higher than its Market Value Equivalent (15%).
• The market is pricing Company C below its actual cash returns, possibly because of concerns about coal’s long-term outlook.
📌 2️⃣ Company A is Not Generating Cash Yet, but Market Expects Future Growth
• CFROA is negative (-8%), but Market Value Equivalent is 17%.
• The market is pricing Company A for future cashflow growth, despite current cash losses.
• Investors may believe in the long-term potential of the business, leading to a higher valuation.
📌 3️⃣ The Market Can Sometimes Misprice Companies
• Market Value Equivalent does not always match actual CFROA—companies can be undervalued or overvalued based on market expectations.
• High market valuations suggest expectations of strong future cashflow, while low market valuations suggest skepticism about future performance.
⸻
📊 Key Takeaways
✔ Company C is generating far more cash than the market is pricing in.
✔ Company A has negative cashflow but a high market valuation due to growth expectations.
✔ Market Value Equivalent helps compare how the market values a company’s cash generation vs. actual performance.
📌 This is why CFROA and Market Value Equivalent should be considered together. A company with high CFROA but low valuation might be overlooked, while a company with low CFROA but high valuation could carry high expectations.
⸻
🚀 This completes the SharpFokus Short Cashflow Course!
📌 Get Full Access to the SharpFokus CFROA Database
🔹 Comprehensive rankings covering nearly 400 Indonesian companies
🔹 Tracks almost 93% of total market capitalization
🔹 Compare CFROA vs. Market Value Equivalent across the entire market
🔹 Updated regularly with the latest cashflow trends
📌 Subscription Price: IDR 1,000,000 per quarter
📌 Payment via Bank Transfer
Bank: Permata
Account Name: PT. Sharpfokus Research Indonesia
Account Number: 702593212
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📌 Companies:
• Company C – Strong CFROA, Lower Market Value Equivalent
• Company A – Negative CFROA, Higher Market Value Equivalent
📌 Period: Last 3 Years (2022-2024)
📌 Metric: CFROA vs. Market Value Equivalent
⸻
🔹 How Does the Market Value Cashflow?
Market Value Equivalent is a way to compare a company’s cashflow returns (CFROA) to the valuation assigned by the market.
📊 3-Year Average CFROA vs. Market Value Equivalent:
✔ Company C: CFROA 40%, Market Value Equivalent 15%
❌ Company A: CFROA -8%, Market Value Equivalent 17%
📌 Key Insight: Company C generates strong cashflow but has a lower market valuation, while Company A generates negative cashflow but is valued higher by the market.
⸻
🔎 What This Tells Us About Market Perception
📌 1️⃣ Company C is Highly Effective in Generating Cash but Has a Lower Valuation
• CFROA (40%) is far higher than its Market Value Equivalent (15%).
• The market is pricing Company C below its actual cash returns, possibly because of concerns about coal’s long-term outlook.
📌 2️⃣ Company A is Not Generating Cash Yet, but Market Expects Future Growth
• CFROA is negative (-8%), but Market Value Equivalent is 17%.
• The market is pricing Company A for future cashflow growth, despite current cash losses.
• Investors may believe in the long-term potential of the business, leading to a higher valuation.
📌 3️⃣ The Market Can Sometimes Misprice Companies
• Market Value Equivalent does not always match actual CFROA—companies can be undervalued or overvalued based on market expectations.
• High market valuations suggest expectations of strong future cashflow, while low market valuations suggest skepticism about future performance.
⸻
📊 Key Takeaways
✔ Company C is generating far more cash than the market is pricing in.
✔ Company A has negative cashflow but a high market valuation due to growth expectations.
✔ Market Value Equivalent helps compare how the market values a company’s cash generation vs. actual performance.
📌 This is why CFROA and Market Value Equivalent should be considered together. A company with high CFROA but low valuation might be overlooked, while a company with low CFROA but high valuation could carry high expectations.
⸻
🚀 This completes the SharpFokus Short Cashflow Course!
📌 Get Full Access to the SharpFokus CFROA Database
🔹 Comprehensive rankings covering nearly 400 Indonesian companies
🔹 Tracks almost 93% of total market capitalization
🔹 Compare CFROA vs. Market Value Equivalent across the entire market
🔹 Updated regularly with the latest cashflow trends
📌 Subscription Price: IDR 1,000,000 per quarter
📌 Payment via Bank Transfer
Bank: Permata
Account Name: PT. Sharpfokus Research Indonesia
Account Number: 702593212
📌 After Payment, Click Below to Confirm via WhatsApp
👉 Confirm Payment on WhatsApp
💡 Once confirmed, access details will be sent via WhatsApp reply.