Tim Koller, a partner at McKinsey & Company, is lead author of Valuation: Measuring and Managing the Value of Companies, which sits alongside Damodaran's work as one of the standard references on corporate valuation. In this interview on The Investor's Podcast, he explains the core ideas behind the book's eighth edition.
- Companies create value by earning a return on invested capital (ROIC) above their cost of capital
- Valuation multiples depend on both growth and return on capital, not growth alone
- Why accounting gimmicks, share buybacks and hitting short-term earnings targets do not create real value
- Why ROIC should be analysed business unit by business unit, not only at group level
Essential listening for business owners and management teams who want to understand what genuinely drives the value of their company.