I posted this before November 7, 2011, but now I embedded the documents for easier access. Also, there is a link to the video. I will keep putting links to videos rather than have a value vault so everyone can have access and I don’t have to keep sending keys.
So what is the company worth? Show your work. Don’t cheat yourself–do the work BEFORE clicking on my notes or the video lecture!
Chapter 16 from Competition Demystified
By now you realize that you need to focus most of your attention as an investor on understanding the particular business, the industry and the competitive interactions within an industry before plugging inputs into whatever valuation model you use. Seek first to understand then value. Often Wall Street places the cart before the horse with its analysts’ projections of earnings and price targets.
After finishing our tour through Competition Demystified, I will ask readers if they want to go deeply into valuation. This chapter gives you a preview of the major issues.
Here are your study questions:
- What are the three major shortcomings of using the NPV approach to valuing companies?
- In an earnings power calculation, what are the six (6) adjustments you need to make to the current cash flow to arrive at an accurate estimate?
- What are the two ways to value a company’s assets?
- The difference between the asset value and the earnings power value is evidence of what?
For those who want a thorough review of valuation case studies from this blog, here they are. If you go through these carefully, you will have the foundation of an MBA course on valuation.
Greenwald VI Process Foundation_Final
Greenwald_2005_Inv_Process_Pres_Gabelli in London
SEALED AIR VALUATION
Sealed Air 1998 10-K
Sealed Air Case Study_Handout
Hudson General Valuation
Hudson General Case Study_Read this First
Valuing Hudson General and Analysis
Greenwald Class Notes 5 – Liz Claiborne & Valuing Growth(2)
See you at the end of this week!