Without careful study, the 'objective' model may generate an impressive answer, but it is trapped in the pitfalls of a seeming accuracy. In short, shareholder value always holds an element of estimation and even emotion. According to Oberdorfer, the most important driving force behind shareholder value is trust. When shareholders start losing trust in a company's top management, the share price drops. He goes on to explain how he approaches valuation.
Shareholder value is the estimated net cash flow for all future years.
Companies are legally required to report profit rather than cash flow, but investors need to know about the latter. Shareholder value is not future profit. Analysts try to translate profit figures into cash flow estimates. You can ask yourself whether the share price is too low or too high. A very important question is always the value of Philips' minority stakes.