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No. of Recommendations: 2

Thanks for the generous comments on the book. I will be the first to admit that some of the calculations are hard to follow; heck, I hard a hard time following Cash Flow and Security Analysis and The Quest for Value when I started out.* But the more companies you study using our two alternate income statements, the easier it gets.

If you are serious about investing, you need a spreadsheet. You can build a defensive income statement in a couple of minutes. The enterprising P&L, however, takes a little more work. You may want to visit Aswarth Damodaran's web site at to check out his spreadsheets, which includes an EVA spreadsheet if I am not mistaken. I recommend all of Damodaran's books. (I do not intend to distribute my spreadsheet because it is proprietary; also, if there is an error in my spreadsheet, then I would feel bad if it caused you to lose money.)

Now to answer your question, yes you can create an Earnings Power Chart using the 30 second approach. To get a per-share figure for the enterprising income statement, try this if you are able: ((return on capital - cost of capital) * capital), divided by shares outstanding.

Maybe other visitors to this board have some suggestions.

My 30 second approach is to see if the company has a return on equity over 20%, and if operating and free cash flow are trending up. I like to see persistent growth; companies that go up and down go in the trash can. You can get this information from Morningstar. I highly recommend Morningstar's web site, including their intrinsic value calculations. I have seen the spreadsheets the Morningstar analysts use to estimate intrinsic value, and they are extremely comprehensive.

*My book synthesizes the free cash flow and Economic Value Added income statements described in these two books.
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