Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes
“If you can look into the seeds of time,
And say which grain will grow and which will not,
Speak then to me.”
Buffett uses Owner Earnings to judge the performance of a company and its management. He also uses Owner Earnings to assess the intrinsic value of a company.
Free cash flow yield can be a better indicator when return on capital (ROC) becomes a vanity metric that unduly flatters economic performance and management. We can charge management with the full cost of Economic Goodwill.