[Corporate Analysis] Company Valuation and Methods

It must be emphasized that this summary covers only valuation methods and related analysis—numerical language that is inherently partial. Truly valuing a company requires far more than these metrics alone. The author will continue learning and sharing additional valuation approaches with readers. To value a company, the following materials are required: ① Annual reports for the past five years (if fewer than five years of data are available, collect as many as possible; for example, Great Wall Motor, listed on the A-share market in 2011, has only two years of annual reports available). ② The company’s three most recent quarterly reports. ③ Annual reports of several representative peer companies in the same industry. Next, analyze historical data to assess the target company’s true status across four dimensions: “cash,” “profitability,” “growth,” and “financial health.” Finally, benchmark the target company against its peers to determine its relative position within the industry. One crucial point to bear in mind: Historical data reflect only the past—not the whole picture. As the saying goes: what appears obsolete today may shine again tomorrow; what enjoys favor now may fade in the future. Table of Contents Part A: Cash Is King 1. Free Cash Flow (FCF) 2. Operating Cash Flow (OFC) 3. Price-to-Cash-Flow Ratio (PCF) 4. Cash Conversion Cycle (CCC) Part B: Profitability 1. Gross Margin 2. Net Profit Margin 3. Asset Turnover 4. Return on Assets (ROA) 5. Asset-to-Equity Ratio 6. Return on Equity (ROE) 7. Return on Invested Capital (ROIC) 8. Dividend Yield Ratio 9. Price-to-Sales Ratio (PS) Part C: Growth 1. Revenue Growth Rate 2. Net Profit Growth Rate 3. Earnings Per Share (EPS) 4. Price-to-Earnings Ratio (PE) 5. PEG Ratio (Price/Earnings to Growth Ratio) 6. (EPS Growth Rate + Dividend Yield) / PE Part D: Financial Health 1. Debt-to-Asset Ratio 2. Debt-to-Equity Ratio 3. Current Ratio 4. Quick Ratio 5. Inventory a. Inventory Growth/Decline Rate b. Inventory Turnover Ratio Part A: Cash Is King 1. Free Cash Flow (FCF) About FCF: a. FCF refers to the amount of cash a company can withdraw annually without impairing its core operations. b. If a company’s FCF amounts to 5% or more of its revenue, you’ve essentially found a “cash-printing machine.” c. Many companies in early rapid-expansion phases show negative FCF (e.g., Starbucks and Home Depot during their early growth stages).

Cigna’s $67 Billion Acquisition of ESI: The Largest Transformation Yet in the PBM Market

On March 8, 2018, Cigna—the fourth-largest U.S. commercial health insurer—announced its acquisition of Express Scripts Holding Company (ESI), the largest independent third-party Pharmacy Benefit Manager (PBM) in the United States. Including ESI’s debt, the total transaction value reached $67 billion. This deal effectively signals the near disappearance of large, fully independent third-party PBMs in the U.S. market—and confirms Latitude Health’s earlier assessment of the U.S. PBM landscape: “Fully independent third-party PBMs may struggle to sustain long-term development; instead, PBMs controlled by, or partially owned by, payers will become the dominant market participants” (see Latitude Health’s December 2017 research report, “Derivative Service Opportunities Amid the End of the Payment Dividend”). Following Aetna—the third-largest U.S. insurer—and CVS Health—the second-largest independent PBM—announcing their merger in 2017, market speculation had been mounting about ESI’s potential sale. Key challenges facing the PBM industry include: payers’ growing loss of trust in fully independent third-party PBMs. For instance, Anthem—the second-largest U.S. commercial insurer—has already declined to renew its contract with ESI, the largest independent PBM; similarly, Aetna—the third-largest commercial insurer—has explicitly stated that third-party PBM services offer limited real value in cost containment. In 2016, thirty major U.S. corporations (now forty) formed the Health Transformation Alliance (HTA), an employer-led coalition dedicated to managing healthcare benefits. Though HTA still partners with PBMs—including CVS and OptumRx—it demands full price and process transparency, joint participation in formulary development, and comprehensive auditing of every transaction—aiming to reduce prescription drug expenditures. Such payer-driven demands have placed immense pressure on the PBM market, ultimately triggering its most profound transformation to date. In 2016, ESI reported total revenue of $100.2 billion, down 2% year-on-year. Of this, $96.5 billion came from PBM operations, with the remainder derived from other services—including research and analytics, and patient assistance programs. Within ESI’s 2016 PBM revenue, $5.14 billion—51% of total revenue—came from retail pharmacy services. However, this segment’s revenue has been declining since 2014: it fell 3% in 2015, 9% in 2016, and 5% in the first three quarters of 2017.

Element Solutions (ESI) Valuation Analysis Following Mixed Q1 Results

May 11, 2026

Element Solutions reported mixed Q1 results with increased sales but lower net income, causing a 4.45% stock drop. Analysts suggest potential overvaluation at current prices despite long-term momentum driven by innovative product commercialization.

Sahm

2026-04-28

Element Solutions Inc Reports Q1 Revenue Exceeding Estimates

2026-04-28

Element Solutions: Q1 Earnings Snapshot

2026-04-28

Element Solutions (ESI) Stock Rises on Q1 2026 Earnings

2026-04-28

Element Solutions Announces Quarterly Earnings, Beats Expectations by $0.03 EPS

2026-04-29

Element Solutions Q1 2026 slides: electronics surge drives guidance raise