In this episode of The Investor's Podcast, Clay Finck interviews Tim Koller, lead author of "Valuation, Measuring and Managing the Value of Companies," about business valuation. They discuss how companies create shareholder value by investing capital at rates of return exceeding their cost of capital, common misconceptions related to value creation, and how managers should think about return on invested capital. Koller emphasizes the importance of long-term revenue growth and return on capital as drivers of cash flow and real value creation, and he touches on how new technologies and sustainability efforts impact valuation. He also shares insights on the differences in returns between the U.S. and Europe and discusses commonly used valuation metrics.
