*Concept of the CFROI life cycle
During a typical company’s life, its business generates varying levels of cash flow return on investment (CFROI) reflecting its stage of development: growth, maturity or decline. While superior CFROIs tend to fade down to the Cost of Capital (CoC) as value creation attracts competition, inferior returns may “fade up” to the CoC as a result of restructuring or competitors exiting the market. The team seeks to identify companies with consistent, superior CFROIs that steadily create value over the long term which is not yet discounted by the market. The team also looks for turnaround stories that are undervalued and for companies experiencing a phase of accelerating growth that may not yet be fully appreciated in terms of the magnitude and duration of the widening positive spread between CFROI and CoC.