Five Cyclically Adjusted Valuation Ratios

Dale talks about five Cyclically Adjusted Valuation Ratios:

Cyclically Adjusted Enterprise Value to EBIT (CAEE™) , Cyclically Adjusted Price to Book (CAPB™), Cyclically Adjusted Enterprise Value to EBITDA (CAEVE™), Cyclically Adjusted Enterprise Value to Free Cash Flow (CAEF™), and Cyclically Adjusted Enterprise Value to Gross Profit (CAEG™) . 

Verbal Disclosures Read from 1:07-2:18

FULL DISCLAIMERS AND DISCLOSURES CAN BE FOUND UNDER THE “IMPORTANT DISCLAIMERS AND DISCLOSURES” SECTION WITHIN THIS URL:    https://dalex5.podbean.com/

 

Provisional Patent Application: The CAEE™ ratio and its use in index construction, ETF automation, and financial analytics is the subject of a provisional patent application filed with the USPTO by Dale’s Solo Investors Podcast LLC and is a proprietary intellectual asset. The CAEE™ ratio is currently in the process of being trademarked. The concepts, methodologies, and proprietary research related to the CAEE™ ratio are confidential and intended solely for informational purposes. Any unauthorized use, reproduction, or incorporation of this methodology into investment frameworks or for research purposes without prior written consent from Dale’s Solo Investors Podcast, LLC is strictly prohibited. This includes use in software, financial products, research publications, or investment services. 

 

Common Law: CAEE™ is a proprietary term developed and used by Dale’s Solo Investors Podcast LLC in connection with financial index construction, investment analytics, and related educational and research services. This mark represents unique combinations of financial methodologies and branding, and is being used in commerce as a trademark under common law. Certain terms are not affiliated with or endorsed by any third-party index provider or financial institution. All other trademarks and registered trademarks referenced are the property of their respective owners.

 

Note: This episode features a security-level report which reflects a component-level analysis used in the ongoing development and maintenance of the   CAEE™ based proprietary index system, which aggregates multiple such analyses into broader ETF , ETP, direct indexing, index, SMA, and mutual fund type strategies.

 

 

 

Limitations of the CAEE™ Ratio (Cyclically Adjusted Enterprise Value to EBIT)

• Backward-Looking Bias: The ratio uses 10-year inflation-adjusted EBIT averages, which means it's based on historical performance. This can obscure recent structural changes in a company (e.g., a pivot to a new business model, significant M&A, or post-pandemic recovery).

• Sector Bias: Asset-light, tech-forward companies may appear overvalued under CAEE™due to low historical EBIT and high EV. Asset-heavy sectors (like industrials, energy, or utilities) may screen as “cheap”.

• Limited Coverage of Intangibles: CAEE™doesn't directly account for intangibles like brand value, network effects, or IP. Companies with low EBIT due to heavy R&D or scaling phases may be penalized unfairly.

• Financial Sector issue: For banks, insurance companies, broker-dealers, and most financial institutions, EBIT is either meaningless or misleading, because Interest income and interest expense are central to their operations. EBIT is supposed to exclude interest by design (hence “Earnings Before Interest and Taxes”), which removes a core operating input/output for financial firms. Debt and interest is a product to financial firms, not just a capital structure.

 

Provisional Patent Application: The  CAPB™ , CAEVE™ , CAEF™ , and CAEG™ , ratios use in index construction and ETF automation is the subject of a provisional patent application filed with the USPTO by Dale’s Solo Investors Podcast LLC.