The Science of Value Investing

It has become more important than ever to understand what goes into a company’s valuation. Investors are under pressure to find returns but would be wise not to forgo fundamental analysis of key factors such as earnings, balance sheets, and cash flow statements.

American Century Investment’s paper ‘A Scientific Approach to Investing’ provides an overview of their thinking on market prices and valuation theory. They suggest not disputing a stock’s price, and instead using it to assess the expected returns of a company given its current price.