%0 Journal Article %A Wesley R. Gray %A Jack Vogel %T Analyzing Valuation Measures: A Performance
Horse Race over the Past 40 Years %D 2012 %R 10.3905/jpm.2012.39.1.112 %J The Journal of Portfolio Management %P 112-121 %V 39 %N 1 %X In this article, the authors compare the investment performance of portfolios sorted on different valuation measures. They find that EBITDA/TEV has been the best performing metric, historically, and outperforms many investor favorites, such as price-to-earnings ratio, free cash flow to total enterprise value, and book-to-market ratio. The authors also explore the investment potential of long-term valuation ratios, which replace one-year earnings with an average of long-term earnings. They find that in contrast to prior empirical work, long-term ratios add little investment value over standard one-year valuation metrics.TOPICS: Portfolio construction, portfolio theory, statistical methods %U https://jpm.pm-research.com/content/iijpormgmt/39/1/112.full.pdf