Page 58 - Five Forces of Americanisation Richard Hooke 04072025 final post SDR1

The UK Defence Industry in the 21 Century
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The Five Forces of Americanisation

9. Moody’s Credit Ratings: setting out the factors affecting creditworthiness

Moody’s Aerospace & Defence credit ratings methodology: last updated December, 2024
10. The Competitive Advantage Period (CAP)
“share prices are not set by capitalizing accounting-based earnings, which are at best flawed and at worst
substantially misleading….The focus must be on the economic drivers of a business, which can be defined
as cash flow (cash-in versus cash-out), risk (and appropriate demanded return) and what we have dubbed
“competitive advantage period”— CAP— or how long returns above the cost of capital will be earned. CAP
is also known as “value growth duration” … in the economic literature. CAP is also similar in concept to
“fade rate.””
(“Competitive Advantage Period “CAP” The Neglected Value Driver” Michael Mauboussin & Paul Johnson;
Frontiers of Finance; Credit Suisse First Boston, January, 1997)

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