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The Valana Model: What is Measured?

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The Valana model does a comprehensive analysis of many enterprise efficiency factors in a company as it applies during a set period of business operations.

The core process is mostly focussed on a "bottom up" evaluation where inherent business fundamentals are the key components.

In addition to this, a "top down" evaluation of other external factors such as the ruling business environment, market forces and other movement catalysts are also taken into consideration when the investment potential is assessed.

What makes the Valana model so effective is not so much related to what is measured, but to how it is done in terms of component relationship impact and element weightings.

The following elements and its trends are analysed and assessed:

  • Growth in revenue and its relationship to trade payables and other expenses incurred
  • Growth in operating profit and its relationship to profit margin patterns displayed
  • Growth in Headline Earnings and its relationship to movements in the price of the stock
  • Revenue to Market Cap profile and the consequent Revenue ratings earned
  • PEG rating obtained during the last reporting period
  • Growth in shareholders interest and potential for building more equity for shareholders
  • Attributable income and ROE trend patterns and relationship to price and value
  • RPE signals to show ROE relationship with PE attained during the reporting period
  • NAV trends and the relationship to the price of the stock
  • PE and situational justification for reversionary mean adjustments
  • Earnings achieved versus reflected expectations anticipated (PE risk profile)
  • Debt incurred, its justification, debt service charge cover and Gearing
  • DE profile, relationship to profit margin, ROE and other anticipated trends
  • Ability to generate and effectively utilise cash flow from normal business operations
  • Free cash flow achieved and its relationship to dividends and other distributions paid
  • Cash and equivalents on hand and its relationship to the Market Cap and share price
  • Current Ratio (Current Assets versus Current Liabilities) and its profile trends
  • Tangible Assets and the achieved Asset Rate obtained and allocated to the company
  • ATO (Asset Turnover) as well as inventory patterns
  • ROAM (Return on Assets Managed) and its profile trends
  • Dividend Profile (Growth, yield, cover, pattern and sustainability potential)

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Over and above the elements and trends already mentioned the model also considers and assesses the potential future impact of the following:

  • Director dealings in the stock of their companies, especially where they buy stock in that company, outside and beyond stock options and other staff benefits.
  • Companies buying back their own shares and, therefore, creating value for their shareholders.
  • To what extent the company can be considered being a moated company, in other words, how well are they protected in the market-place from attack by their competitors or new entrants to their markets.
  • The level of product or service monopoly they enjoy in the market-place.
  • How sustainable the future consumer need levels are for their products and services.
  • The quality and perceived integrity of leadership and management in the company, based on past achievements, business acumen displayed and general image or perception of their competency amongst market analysts and other business leaders.
  • Their ability and reputation as dealmakers which enables them not to only rely on organic growth, but to also benefit from profitable innovative mergers and acquisitions.
  • How sound and well established they are in the business environment they operate in.
  • How diverse their business interests are to protect them from downturns in specific sectors.
  • To what extent the stock is perceived as a defensive stock or a "safe haven" investment.
  • How they rank in size (Market Cap) and their global business interest spread.
  • Their reputation/standing or listing on other offshore equity markets.
  • To what extent the company is protected or free from labour unrest and other negative events.
  • To what extent the company may benefit or suffer from market forces and other catalyst developments.
  • To what extent performance may be influenced by industry events and developments.
  • How liquid and tradable the company's stock may be if one should want to "dump" it in a downturn.
  • How volatile the company's stock responds to general market movements and its past three years (Beta profile).
  • To what extent the company is favoured by the big market players as stock to be held in their funds or portfolios.
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