What You See and What You Get

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Jul 27, 2007
Legg Mason's Chief Strategiest Michael J. Mauboussin discussses why cashflow is more important than earnings: "Cash is a fact, profit is an opinion."


• A company’s value equals the present value of future cash flows.

• While convenient, earnings provide limited information about future cash flows.

• Our analysis of the DJIA suggests cash flows remain very healthy.

• The ongoing shift to an intangible-based economy renders earnings even less


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