Analyzing Valuation Measures: A Performance Horse-Race Over the Past 40 Years

Posted: 13 Dec 2011 Last revised: 1 Oct 2012

See all articles by Wesley R. Gray

Wesley R. Gray

Alpha Architect; Drexel University - LeBow College of Business

Jack Vogel

Alpha Architect; Villanova University

Date Written: March 29, 2012


We compare the investment performance of portfolios sorted on different valuation measures. EBITDA/TEV has historically been the best performing metric and outperforms many investor favorites such as price-to-earnings, free-cash-flow to total enterprise value, and book-to-market. We also explore the investment potential of long-term valuation ratios, which replace one-year earnings with an average of long-term earnings. In contrast to prior empirical work, we find that long-term ratios add little investment value over standard one-year valuation metrics.

Keywords: enterprise multiple, price to earnings, price to book, free cash flow, gross profits, valuation metrics

JEL Classification: G10, G14

Suggested Citation

Gray, Wesley R. and Vogel, Jack, Analyzing Valuation Measures: A Performance Horse-Race Over the Past 40 Years (March 29, 2012). Journalof Portfolio Management, Forthcoming, Available at SSRN: or

Wesley R. Gray (Contact Author)

Alpha Architect ( email )

213 Foxcroft Road
Broomall, PA 19008
United States
7732304727 (Phone)

HOME PAGE: http://

Drexel University - LeBow College of Business ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States


Jack Vogel

Alpha Architect ( email )

19 E. Eagle Road
Havertown, PA 19083
United States
215-882-9983 (Phone)


Villanova University ( email )

Villanova, PA 19085
United States

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