EV/GCI
EV/GCI (enterprise value/gross cash invested) is an advanced valuation multiple used to compare a company's book value of its assets to their current market value. The ratio is similar to P/B ratio, but EV/GCI is calculated on an EV-basis, taking into account all the company's security-holders.[1]
Formula
[edit]- GCI (Gross cash invested) = (Gross tangible and intangible assets before depreciation or write-offs) + (investments in associates) + (working capital)[2]
When EV/GCI is higher than 1, then the market is willing to pay a valuation premium. A discount takes place in the opposite case.
Use in valuation
[edit]EV/GCI has been used in CROCI-based equity valuation frameworks. Goldman Sachs research materials describing the "Director's Cut" methodology present EV/GCI alongside cash return on capital invested (CROCI) as part of a returns-based approach to equity valuation.[3]
In the same material, Goldman Sachs stated that companies with leading CROCI historically traded at a premium under the Director's Cut methodology on EV/GCI, and presented historical EV/GCI ranges by CROCI quartile.[4]
References
[edit]- ↑ "Introducing GS Sustain". Retrieved 29 October 2015.
- ↑ Workshop V: Relative Valuation
- ↑ "Identifying Russia's structural leaders" (PDF). Goldman Sachs Global Investment Research. Retrieved 7 May 2026.
- ↑ "Identifying Russia's structural leaders" (PDF). Goldman Sachs Global Investment Research. Retrieved 7 May 2026.
External links
[edit]- COMPANY UPDATE Ericsson (ERICb.ST) Archived 2012-03-13 at the Wayback Machine
- COMPANY UPDATE Benetton Group (BNG.MI)
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