Step 1: In assessing a company’s current valuation, HOLT determines the next two years of cash generation from existing businesses for each firm based on the consensus estimate of earnings and revenues by analysts.
Step 2: HOLT then projects future free cash flows over the next 38 years from existing businesses based on fade algorithms developed from an analysis of historical cash flows from over 45,000 firms and more than 500,000 data points.
The fade algorithm for a given company is based on the following:
a) The forward two-year consensus estimate of ROI level.
b) Historical ROI volatility (over the previous five years).
c) A company’s reinvestment rate.
Step 3: The difference between the company’s total enterprise value (market value of equity plus total debt) and this value of existing business constitutes the innovation premium, expressed as a percentage of the enterprise value.
| 1 |  Salesforce.com | United States | 32.1 | 21.6 | 72.8 |
| 3 |  VMware | United States | 16.3 | 19.0 | 63.7 |
| 31 |  Dassault Systemes | France | 4.7 | 16.7 | 35.5 |
| 50 |  Citrix Systems | United States | 16.5 | 19.6 | 30.7 |
| 56 |  Intuit | United States | 9.1 | 17.3 | 27.9 |
| 72 |  SAP | Germany | 6.1 | 7.0 | 22.7 |
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