Why the Introduction of Time Was Decisive in Equity Valuation: From Static Multiples to Forward-Looking, Risk-Adjusted Returns Comparable to Bond Yields

Equity valuation has historically relied on static multiples, in particular the price–earnings (P/E) ratio, which measure neither the temporal dimension of value creation nor the return actually associated with an equity investment. Although the financial literature has progressively introduced earnings growth and discount rates, time long remained an implicit parameter rather than an explicit outcome of valuation. This article retraces the conceptual and chronological evolution of the introduction of time in equity valuation and shows that the decisive break occurs when time itself becomes the object of measurement, with the introduction of the Payback Period (Délai de Recouvrement, DR) in 1985 and its subsequent formalization as the Potential Payback Period (PPP). This approach makes it possible, at a later stage, to compute a forward-looking, risk-adjusted shareholder return, directly comparable to a bond yield. The article argues that this transition from static multiples to forward-looking returns constitutes a genuine paradigm shift in valuation theory.