How does it work?

The RBP Snapshot is designed to provide you with an objective way to asses a company's value.

When you use the RBP Snapshot, you should measure the RBP and RBP components against the actual performance-to-date. We give you this number: It is called LTM (last twelve months) performance. The closer these two numbers are the more fairly valued the company might be. The farther apart the numbers are, the more over-valued the company could be. If the RBP is lower than the performance-to-date, the company might be under-valued. But remember that a large variance between what is required and what has been done does not necessarily mean the company is under- or overvalued. It might be possible for the company to achieve its RBP - you have to do the research to find out. The RBP Snapshot simply provides an objective data point from which to start.

It is also important to note that the RBP and RBP components only give you half of the answer. They tell you how much a company has to do to support its current stock price; they don't tell you whether the company can actually do it. You must ask the most important due diligence question: Can it be done? Can management deliver the performance to support the price of its stock?

A guide to this question can be found in the RBP probability. The higher the RBP probability, the more likely the management of a company will deliver the required business performance to support the price of the stock. The higher stock prices go, the lower the RBP probability goes; in a sense, as the stock price gets higher the harder it becomes for management to perform and vice versa.

But remember the RBP probability is a good starting point, and is not a substitute for doing good research; you still need to do the research before making an investment decision.