For business owners or investors, organizational valuation starts from competitive benchmarking. Consequently, gut instincts precede calculations in decision-making.
The superiority of financial performance metrics over competitive benchmarks is a diagnostic of competitive advantage…
For instance, the dynamics of asset utilization indicators vis-à-vis competitors are illustrated in the table… Here, it becomes apparent that the outperformance of ROA is not aligned with better sales but with better margins… This is just a part of the story…
If an organization has a competitive advantage, it must be manifested, whether in operational leverage, financial leverage, or asset utilization metrics detailed in the benchmarks…
Etc. Parsing through DuPont formulae provides a good opportunity for analysis, but the value of this analysis increases if comparisons of digits are not only historical but also with competitors’ benchmarks…
*Corporate Valuation Theory, Evidence and Practice – by M. E. Zmijewski; R. W. Holthausen
