The document discusses factors that influence asset valuation and how investors determine if an asset is above or below its fair value. It states that investors will pay higher valuations for assets with improving profitability, consistency, or financial situations. It also notes that valuation should not be static and that analyzing trends in areas like margins, earnings, and performance versus peers or history can help decide if an asset is above or below fair value. The document contains additional charts and analyses to support its discussion of valuation metrics and factors.

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The Most Important Valuation
Question In Investments
Bob Gillooly, CFA

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Are things getting better, or worse?

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All things equal, every asset has an equilibrium or
fair market value, but more often than not these
assets trade above or below their calculated fair
market value.

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Question:
If your own financial situation is getting better, will you spend more
money?
Answer:
Most people will begin to spend more as their finances improve,
and the same is true for investors. Investors will pay more or
assign a higher valuation for either an improving situation or one
with consistency and visibility.

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If All Things Were Equal…
a) Investors will pay a higher valuation for investments with greater
profitability
b) Investors will pay a higher valuation for investments with
greater consistency.
High Profitability
High Profitability
High Degree of Consistency
Low Profitability
Low Degree of Consistency
High Degree of Consistency
HighProfitability
High Degree of Consistency

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Question:
How do you decide if something should be above or below fair value?
Answer:
Look for accelerations and decelerations
•How are margins and profitability improving?
•How are earnings and revenue improving?
•How are results relative to its’ own history?
•How are results relative to its’ peers or the market?

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Question:
What kind of company are you analyzing?
Answer:
The answer to this question will determine the
appropriate type of valuation metric to use.
•Cyclical?
•Growth
•Mature growth?
•Cash flow?
•Price/Earnings ratio
•Price/Book ratio
•Price/Cash flow ratio
•Dividend discount model
•Discounted cash flow model

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Summary:
Valuation shouldn’t be considered in a
vacuum, or on a static basis. Recognize what
has transpired in the past, and it will improve
your valuation of the future.

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Appendix:
1. Chart of Autodesk
2. Chart of Red Hat Software
3. Chart of Dow Chemical
4. Chart of Apple
5. World Earnings Revisions
6. Emerging Market Profitability
7. Global Equity Valuations – Developed Markets
8. Global Equity Valuations – Emerging Markets

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Shannon Lemon, CFP
Shannon’s primary responsibilities include working directly with our clients on assessing their
financial situation and putting a plan in place to meet their financial goals. Prior to co-founding
Elmwood Wealth Management, Shannon worked for Osborne Partners Capital Management for
18 years and was their Chief Compliance Officer and a principal of the firm. Shannon holds the
CFP designation and received a B.A. from the University of Colorado at Boulder.
Our Team:
Robert C. Gillooly, CFA
Bob is a portfolio manager and member of the Elmwood Investment Committee. His primary
responsibilities include U.S. domestic stock and bond research, as well as working with our
financial planners on setting asset allocation for client portfolios. Prior to co-founding Elmwood
Wealth, Bob worked for Osborne Partners Capital Management for 18 years and was their Vice
President, Chief Operating Officer and a principal of the firm. He was a voting member of the
four person investment committee responsible for choosing individual securities and setting
asset allocations for over $1 billion of client funds. Bob also had sole responsibility for setting
strategy for their approximately $300 million bond portfolio. Bob holds the Chartered Financial
Analyst designation and received a B.A. from the University of Michigan.
Steve Caltagirone
Steve is a portfolio manager and financial planner with Elmwood. Steve works directly with our
clients to assess financial goals and objectives throughout each stage of the financial life cycle.
Prior to joining Elmwood, Steve worked for Osborne Partners Capital Management where he
advised clients across a wide range of portfolio and financial planning matters. Previously, he
served as a portfolio manager with Bingham, Osborn and Scarborough. Steve received an MBA
from Vanderbilt University and a B.S. from St. Mary’s College of California.

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Bob Gillooly, CFA Shannon Lemon, CFP Steve Caltagirone
510-858-2721 510-858-2722 510-903-5928
bob@elmwoodwealth.com shannon@elmwoodwealth.com steve@elmwoodwealth.com
Elmwood Wealth Management
2027 Fourth St., Suite 203
Berkeley, CA 94710
(510) 858-2723
www.ElmwoodWealth.com

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Appendix: Disclosures
The information in this presentation is intended for U.S. Residents only and is not intended for distribution in any jurisdiction
where Elmwood Wealth Management Inc. (EWM) is not licensed to distribute such information or where such offer,
solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information provided in this
presentation is for information purposes only and should not be construed as investment, tax, or estate planning advice or a
determination that a particular product or service is suitable for any individual. This information should not be relied upon in
making an investment, tax, or estate planning decision and any decision based on information contained in this presentation
are the sole responsibility of the visitor or recipient.
This information is not intended to be used as a general guide to investing, or as a source of any specific investment
recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account
should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives. It is the
responsibility of any person or persons in possession of this material to inform themselves of and to take appropriate advice
regarding any applicable legal requirements and any applicable taxation regulations which might be relevant to the
subscription, purchase, holding, exchange, redemption or disposal of any investments.
This information neither constitutes an offer to enter into an investment agreement with the recipient of this document
nor an invitation to respond to the document by making an offer to enter into an investment agreement.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk. Past
performance is not indicative of future results, which may vary. The value of investments and the income derived from
investments can go down as well as up. Future returns are not guaranteed, and a loss of principal may occur.
Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may, without
Elmwood Wealth Management’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or
(ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient