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AVK (Advent Convertible &ome Fund) Earnings Power Value (EPV) : $-9.26 (As of Oct23)


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What is Advent Convertible &ome Fund Earnings Power Value (EPV)?

As of Oct23, Advent Convertible &ome Fund's earnings power value is $-9.26. *

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

Margin of Safety is N/A.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future. Assumption: Current profitability is sustainable.


Advent Convertible &ome Fund Earnings Power Value (EPV) Historical Data

The historical data trend for Advent Convertible &ome Fund's Earnings Power Value (EPV) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Advent Convertible &ome Fund Earnings Power Value (EPV) Chart

Advent Convertible &ome Fund Annual Data
Trend Oct17 Oct18 Oct19 Oct20 Oct21 Oct22 Oct23
Earnings Power Value (EPV)
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Advent Convertible &ome Fund Semi-Annual Data
Oct17 Apr18 Oct18 Apr19 Oct19 Apr20 Oct20 Apr21 Oct21 Apr22 Oct22 Apr23 Oct23 Apr24
Earnings Power Value (EPV) Get a 7-Day Free Trial Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only - - - - -

Competitive Comparison of Advent Convertible &ome Fund's Earnings Power Value (EPV)

For the Asset Management subindustry, Advent Convertible &ome Fund's Earnings Power Value (EPV), along with its competitors' market caps and Earnings Power Value (EPV) data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.


Advent Convertible &ome Fund's Earnings Power Value (EPV) Distribution in the Asset Management Industry

For the Asset Management industry and Financial Services sector, Advent Convertible &ome Fund's Earnings Power Value (EPV) distribution charts can be found below:

* The bar in red indicates where Advent Convertible &ome Fund's Earnings Power Value (EPV) falls into.



Advent Convertible &ome Fund Earnings Power Value (EPV) Calculation

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

The basic concept of EPV is that one should value a stock based on the current free cash flow of a company and not on future projections which may, or may not, come true. This valuation tool excludes the potential growth that a company may have so that needs to be looked at separately. Since future growth is excluded from the analysis, only the maintenance capital expenditures are subtracted from after-tax EBIT (earnings before interest and taxes) and growth capex is ignored.

Advent Convertible &ome Fund's "Earning Power" Calculation:

Average of Last 5 Years Last Year
Revenue 24.58
DDA 0.00
Operating Margin % 0.00
SGA * 25% 0.45
Tax Rate % 0.00
Maintenance Capex 0.00
Cash and Cash Equivalents 0.57
Short-Term Debt 0.00
Long-Term Debt 349.02
Shares Outstanding (Diluted) 37.65

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating Income.

2. Look at average margins over a business/Industry cycle: Average Operating Margin = 0.00%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins. Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenues as the sustainable revenue.
EPV analysis recognises that part of SG&A expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SG&A (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.
Sustainable Revenue = $24.58 Mil, Average Operating Margin = 0.00%, Average Adjusted SGA = 0.45,
therefore "Normalized" EBIT = Sustainable Revenue * Average Operating Margin + Average Adjusted SGA = 24.58 * 0.00% +0.45 = $ Mil.

4. Multiply by one minus Average Tax Rate (NOPAT):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates.
Average Tax Rate = 0.00%, and "Normalized" EBIT = $ Mil,
therefore After-tax "Normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = * ( 1 - 0.00% ) = $0 Mil.

5. Add back Excess Depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess Depreciation = Average DDA * % of Excess Depreciation (after tax at 1/2 average tax rate) = 0.00 * 0.5 * 0.00% = $0 Mil.
"Normalized" Earnings = After-tax "Normalized" EBIT + Excess Depreciation = 0 + 0 = $0 Mil.

6. Adjusted for Maintenance Capital Expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.
Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.
Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditures as maintenance CAPEX.
Advent Convertible &ome Fund's Average Maintenance CAPEX = $0.00 Mil *.
* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. Advent Convertible &ome Fund's current cash and cash equivalent = $0.57 Mil.
Advent Convertible &ome Fund's current interest bearing debt = Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation = 349.02 + 0.00 = $349.022 Mil.
Advent Convertible &ome Fund's current Shares Outstanding (Diluted Average) = 37.65 Mil.

Advent Convertible &ome Fund's Earnings Power Value (EPV) for Oct23 is calculated as:

EPV = ( ( Norm. Earnings-Maint. CAPEX *) / WACC + CashandEquiv - Int. Bearing Debt ) / Shares Outstanding (Diluted Average)
= ( ( 0 - 0.00)/ 9%+0.57-349.022 )/37.65
=-9.26

Margin of Safety (EPV)=( Earnings Power Value (EPV)-Current Price )/Earnings Power Value (EPV)
=( -9.2552524635448-12.47 )/-9.2552524635448
= N/A

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* GuruFocus does not store EPV value into our database if Average Maintenance CAPEX is 0.


Advent Convertible &ome Fund  (NYSE:AVK) Earnings Power Value (EPV) Explanation

Assumption: Current profitability is sustainable.

Earnings power value (EPV) uses a very basic equation which assumes no growth, although it does rely on an assumption about the cost of capital as well as the fact that current earnings are sustainable. It also involves several adjustments to clean up the underlying Earnings figures.


Be Aware

Though using today's earnings in calculating Earnings Power Value, GuruFocus is normalizing these earnings to the business cycle. This eliminates the effects on profitability of valuing the firm at different points in the business cycle. This means that we are considering the average earnings over 5 years.


Advent Convertible &ome Fund Earnings Power Value (EPV) Related Terms

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Advent Convertible &ome Fund Business Description

Traded in Other Exchanges
N/A
Address
888 Seventh Avenue, 31st Floor, New York, NY, USA, 10019
Advent Convertible & Income Fund is a diversified, closed-end management investment company. The fund's investment objective is to provide total return through a combination of capital appreciation and current income. The Fund invests in various sectors, such as communications, utilities, energy, industrial, technology, and others.
Executives
Nancy E. Stuebe director, other: Trustee 227 W MONROE STREET, CHICAGO IL 60606
Daniel Black director, other: Trustee C/O ADVENT CAPITAL MANAGEMENT, LLC, 1065 AVENUE OF THE AMERICAS, 31ST FLOOR, NEW YORK NY 10018
Gerald L Seizert director, other: Trustee 10865 AVENUE OF THE AMERICAS,, 31ST FLOOR, NEW YORK NY 10018
Tony Huang officer: V.P. & Assistant Secretary 227 WEST MONROE STREET, CHICAGO IL 60606
Tracy V Maitland officer: President, other: Trustee 10865 AVENUE OF THE AMERICAS,, 31ST FLOOR, NEW YORK NY 10018
Ronald Nyberg director 10865 AVENUE OF THE AMERICAS,, 31ST FLOOR, NEW YORK NY 10018
Randall C Barnes director, other: Trustee 2455 CORPORATE WEST DRIVE, LISLE IL 60187
Advent Capital Management /de/ other: Investment Manager 888 SEVENTH AVENUE, 31ST FLOOR, NEW YORK NY 10019
Stephen Ellwood officer: CCO & Secretary 888 SEVENTH STREET, 31ST FLOOR, NEW YORK NY 10019
Olin Kathleen Capital Management officer: CCO and Secretary 888 7TH AVENUE 31ST FLOOR, NEW YORK NY 10019
Michael A Smart other: Trustee 10865 AVENUE OF THE AMERICAS,, 31ST FLOOR, NEW YORK NY 10018
Derek Medina director ABC NEWS, 47 WEST 66TH STREET, NEW YORK NY 100123
Saba Capital Management, L.p. 10 percent owner 405 LEXINGTON AVENUE, 58TH FLOOR, NEW YORK NY 10174
Boaz Weinstein 10 percent owner 405 LEXINGTON AVENUE, 58TH FLOOR, NEW YORK NY 10174
Doug Teresko other: Managing Director 1271 AVENUE OF THE AMERICAS, 45TH FLOOR, NEW YORK NY 10020