By
Borsgade
Canadian value investor François Rochon, President of Giverny Capital, recently gave an interview with the site Compounding Quality.
Here he discusses one of the topics Rochon believes is the key to successful fundamental investing: Owner earnings. According to Rochon, a company’s share price follows the growth of EPS (earnings per share) plus dividends. This makes this development worth following over time.
You can read the full interview in the link below.
It’s very simple to calculate the Owner’s Earnings. We arrive at our estimate of the increase in intrinsic value of our companies by adding the growth in earnings per share (EPS) and the average dividend yield of the portfolio.
So we just multiply the EPS by the number of shares we own of each company. We add them all up and compare the total with the total of the previous year. And to that growth rate, we add the average dividend yield.
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