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· ane,397 ratings · 47 reviews
Beginning your review of Valuation: Measuring and Managing the Value of Companies
On a bones level there are two competing mental models of stock values in the financial sector. The first is that the value of something is what someone is prepared to pay for that something. In the equity marketplace this leads to statements such as "the valuation of a stock is low" if the current market pricing of the stock is historically low compared to, for example, the approximate of the near term hereafter earnings. The other model is based on that a visitor has a cardinal intrinsic value that is On a basic level there are two competing mental models of stock values in the fiscal sector. The start is that the value of something is what someone is prepared to pay for that something. In the equity market this leads to statements such equally "the valuation of a stock is low" if the electric current market pricing of the stock is historically low compared to, for example, the judge of the almost term future earnings. The other model is based on that a company has a cardinal intrinsic value that is separate from the market pricing of its disinterestedness. This volume is almost both how to guess this intrinsic value and too on how to create it.Out of all the books reviewed on this website Valuation is probably the one that sits on nigh shelves behind workstations of employees in the fiscal sector. The reason is that about of us have had information technology as a text book at university, but compared to all the other text books this one is besides a handbook in corporate valuation that is used past practitioners. For those who use the concept of intrinsic value, cash flow valuation has become the standard methodology and Valuation is the standard source material. The book is mandatory reading for persons within corporate finance, venture capital letter and individual equity who are slightly less shut to the public stock market. It is less widely used past portfolio managers or sell side analysts who often await to shorter time horizons.
At that place are obviously competing text books on valuation such as Damodaran on Valuation. Where professor Aswath Damodaran'southward writing is bookish and covers more ground with regards to different aspects of securities valuation, Valuation is a practical book that connects valuation to corporate strategy and value based management. Two of the he authors of Valuation are employed past McKinsey and the main focus is on 1 specific method of valuation. This is a fifth edition. Over the years this book has become more and more of a practitioner's manual with consequent course, new sections on special situations and sector issues plus solutions to all kinds of practical problems in a DFC-valuation. More bookish issues such equally if CAPM is really a practiced model to employ for estimating the WACC, when information technology has become more and more obvious that beta doesn't piece of work, is toned down as this would only subtract from the practical value of the book. Damodaran on Valuation is written by an academic, Valuation is written past consultants for daily use by CEOs and finance professionals.
The intrinsic value in a DCF is based on cash flows, the growth in cash flows and the risk that these future greenbacks flows volition not materialize. The cash flow in question differs; information technology might exist dividends for stocks, coupons for bonds or afterward tax cash flows for businesses. The problem is that every bit the hereafter is unknown the intrinsic value is unobservable. Any calculation of it is an deed of organized religion. One strength of the DCF is that it is transparent. It requires a large number of assumptions of future operation. Each such input has a range of reasonable values and the choice of inputs can exist examined and criticized. Paradoxically the construction also opens upwardly for psychological biases. If each and ane of the many inputs are tweaked in a slightly more optimistic or pessimistic direction the multiplier outcome of all those small (but one by one reasonable) changes will bring huge swings in the calculated intrinsic value. The fact that a DCF could be made to testify nigh annihilation has created a mini revival for backlog return valuations such as the Residual Income Model. These are close cousins to the DCF methodology, but use a) the capital base of the visitor and b) its power to earn a return on capital that is college than the toll of capital as the ii master inputs. Using the capital letter as the base for the valuation makes it potentially less dependent on estimates of an unknowable futurity.
This book is unbeatable for the practitioner who needs the tools for valuing a company or must sympathise how other do just that. More than philosophical issues are to be sought elsewhere.
...more (fifth edition)When you lot first your career in Finance / Investment industry, especially fiscal analyst, it must exist your bible. From experiences in dissimilar industries for many years working as a strategic consulting firm, McKinsey'south experts have given united states tons of research & insight those would never be revealed and summarized in any other documents. Nearly 900 pages of this volume will take us a large amount of time to read, to comprehend, to understand what the authors want to evangelize. It's not o
(5th edition)When you start your career in Finance / Investment manufacture, peculiarly financial analyst, it must be your bible. From experiences in different industries for many years working as a strategic consulting firm, McKinsey'southward experts have given us tons of inquiry & insight those would never be revealed and summarized in whatever other documents. Nearly 900 pages of this volume volition take us a large amount of time to read, to comprehend, to sympathize what the authors want to deliver. It'southward non only a thorough perspective about Discounted Greenbacks Flows (DCF) model merely the best way to approach to any company valuation.
There are besides 3 key points I supposed that we can conclude afterwards all:
ane. DCF model is even so the best way to value a company regardless its industry but we need to use it correctly & creatively. Only some pocket-sized techniques in procedure are distinctive. Probability analysis also contribute a large portion in execute DCF model smoothly with unremarkably 2 scenario (base-case & extreme-i). Function Half-dozen also gives u.s. hints when using DCF model to value some special cases every bit loftier-growth companies or banks.
2. The difference between Return on Invested Majuscule (ROIC) & Weighted Average Cost of Capital (WACC) is the most crucial performance tracker of every single enterprise. While ROIC maybe calculated without obstacles (for companies with reliable financial numbers), WACC is the truthful pain considering of appearances of too many variables such equally gamble-free rate (with emerging market), beta (levered or unlevered), expected market returns and another risk premiums.
3. Always enquiry collectively & exhaustively nigh the manufacture that company we valuing operates in. Must try to figure out the key value drivers in the manufacture considering they are the most reliable sources for u.s. to use as a basis for assumptions when forecasting company's financial position.
...more than An astonishing valuation book This volume added a lot of insights to me! I would recommend it for college students, professionals, and corporate executives.
Hailed by financial professionals worldwide equally the single best guide of its kind, "Valuation," 4th Edition is thoroughly revised and expanded to reflect business organization conditions in today'south volatile global economy. "Valuation" provides up-to-date insights and practical advice on how to create, manage, and measure an organization's value. Forth with all-new case studies that illustrate how valuation techniques and principles are practical in existent-world situations, this comprehensive guide has been upd Hailed by financial professionals worldwide as the single all-time guide of its kind, "Valuation," 4th Edition is thoroughly revised and expanded to reflect concern conditions in today's volatile global economy. "Valuation" provides up-to-date insights and practical communication on how to create, manage, and mensurate an arrangement's value. Along with all-new instance studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect the events of the Internet bubble and its effect on stock markets, new developments in academic finance, changes in accounting rules (both U. South. and IFRS), and an enhanced global perspective. This edition contains the solid framework that managers at all levels, investors, and students have come to trust ...more
I studied this book with the hopes of gaining some more in depth methodology for valuation. This has a lot of information merely is admittedly a little beyond my ability at the fourth dimension. I recall the information is solid and it will be something I keep on paw as a reference text specially as I get a little more established.With that being said, I'm not completely sold on the accurateness of Discounted Gratis Cash Flow with the methods being purported. I feel like it leaves too much up to speculation and esp
I studied this book with the hopes of gaining some more in depth methodology for valuation. This has a lot of information but is absolutely a trivial across my power at the time. I call up the data is solid and it will be something I keep on hand equally a reference text peculiarly as I become a trivial more established.With that being said, I'thou not completely sold on the accurateness of Discounted Free Cash Period with the methods being purported. I feel like information technology leaves as well much upwardly to speculation and especially with how complicated it gets to calculate I wait I would never feel the sense of precision I would like later working through it.
I'll mayhap update a review upon revisiting this volume but I am currently of a neutral opinion towards it.
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(7th edition)Cracking reference on valuation of companies and covers the topics very well from a theoretical perspective. Prissy example examples. Not exactly "readable", just a great form book and 1 I'll go on in my bookshelf for later.
(7th edition)Not bad reference on valuation of companies and covers the topics very well from a theoretical perspective. Nice case examples. Not exactly "readable", just a great course book and one I'll keep in my bookshelf for later on.
...more I needed to get through this book very fast, but overall it is a good book with a lot of examples from life. I read the 6th and 7th edition parallel as the school updated the literature in the last infinitesimal. I think if yous buy a new one, it'south worth to invest in the newest edition. It has a lot of updates, especially market related ones. You tin can get a amend grasp of how the market looks right at present. This book helped me course a better portfolio. The very first capacity put you in deep water: overwhelmi
I needed to go through this book very fast, but overall information technology is a good volume with a lot of examples from life. I read the 6th and seventh edition parallel as the school updated the literature in the last infinitesimal. I call up if you lot purchase a new one, it's worth to invest in the newest edition. It has a lot of updates, peculiarly market related ones. You can get a better grasp of how the market place looks right at present. This book helped me form a better portfolio. The very starting time chapters put y'all in deep water: overwhelming amount of formulas. As you manage to read the first 6 chapters things become more than articulate. Be patient.
I affair this volume won't prove you lot is how to calculate EBIT, NOPLAT and other stuffs in your DCF model in practice. The formulas the volume suggest are not the same we used to build the model. You need to connect the dots by yourself and it's quite a work.
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This is the all-time book I've come beyond on the topic. It breaks downward the fundamentals of how value is created and various approaches for measuring it. It doesn't matter whether you are a subscriber to the efficient market hypothesis or if you call back stock price volatility is a silly way to mensurate risk. It goes beyond cookie-cutter descriptions and is a must read for anyone interested in agreement what drives the value of companies, whether for personal or professional purposes. This book is n This is the best book I've come beyond on the topic. It breaks downwards the fundamentals of how value is created and diverse approaches for measuring it. It doesn't matter whether you are a subscriber to the efficient market hypothesis or if y'all think stock price volatility is a empty-headed fashion to measure risk. It goes beyond cookie-cutter descriptions and is a must read for anyone interested in understanding what drives the value of companies, whether for personal or professional purposes. This book is not meant to shape your philosophy to valuation but contains core principles that must exist learned before you are allowed to even have an opinion. ...more
The volume is extremely technical and full of applied tools - might be tedious for some practitioners. Nevertheless there's too a lot of practical and interesting thoughts about value creation in an enterprise, esp. by actively managing corporate lines portfolio. The volume is extremely technical and full of applied tools - might be dull for some practitioners. Still there's also a lot of practical and interesting thoughts about value creation in an enterprise, esp. by actively managing corporate lines portfolio. ...more than
A very expert reference book on identifying underlying value.
Books either fulfill their purpose or they don't. If you understand the basics of finance (300 level-set up and above) and you want 1 book to read and so apply as a reference to learn how to understand and comport business organization valuations, this is ane of the books to consider. It volition exist over some readers' heads, but its focus is broad and covers some basics, so there's likely something else that better suits the needs of an good looking for a deeper understanding of one specific issue. But it cov Books either fulfill their purpose or they don't. If y'all understand the basics of finance (300 level-prepare and higher up) and yous want one volume to read and and then use as a reference to learn how to understand and conduct business valuations, this is one of the books to consider. It volition be over some readers' heads, but its focus is broad and covers some basics, so there'south probable something else that better suits the needs of an adept looking for a deeper understanding of one specific result. Merely information technology covers valuation principles well and delves into the mutual complicating factors, the well-nigh usually relevant theoretical challenges, etc. ...more than
The first part is very insightful to learn what makes great companies not bad and how they sustain their competitive advantages based on ii concepts: ROIC and growth. I got lost in the 2d and third part about valuation techniques and skipped almost of it. The 4th office is interesting to read, mainly for managers and people who desire to know better what decisions and models are useful to invest in. Finally, the terminal function goes deeper in special situations (emerging markets, high-growth, Thousand&A...) and a shal The first function is very insightful to larn what makes great companies great and how they sustain their competitive advantages based on ii concepts: ROIC and growth. I got lost in the 2nd and 3rd part nearly valuation techniques and skipped well-nigh of it. The 4th part is interesting to read, mainly for managers and people who desire to know ameliorate what decisions and models are useful to invest in. Finally, the final part goes deeper in special situations (emerging markets, high-growth, M&A...) and a shallow reading is quite informative if yous (similar me) don't desire to mess with the numbers.I give it 5 stars considering I will probable come back to information technology over again and once again during my life as investor.
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Probably the best book of equity valuation at that place is. More relatable to those who have already spent some fourth dimension in the industry tracking and valuing companies. What makes this unique is the very practical and hands on communication which can be straightaway applied on the chore. At the same time this is also a conceptually sound book.
A classic on the subject of the financial valuation of companies and business lines. Information technology also includes a great affiliate on unearthing hidden value within a corporation via restructuring and the manipulation of value levers.
Good overview of valuation, merely somewhat limited give-and-take on management of value
A must-read book for every Value Investor / Equity Research Professionals. I would besides like to read the latest (7th) edition for the ESG attribute in valuation.
Ane of the best books in Valuation, no doubt about it.
Ok book, first 180 pages are informative and detailed from accounting point of view, , then it becomes repetitive , agglomeration of chapters in the middle on empirical studies and investor relations etc. which you can easily skip or detect data elsewhere. Good introduction to gratuitous cash flows, ROIC and multiples such as EV/EBITA; useful if you want to learn how classify operating and nonoperating items and /or reorganize the fiscal statements..only lacks depth of analysis to merits to be a definit Ok book, outset 180 pages are informative and detailed from bookkeeping point of view, , then it becomes repetitive , bunch of chapters in the center on empirical studies and investor relations etc. which you can hands skip or find information elsewhere. Good introduction to gratuitous cash flows, ROIC and multiples such as EV/EBITA; useful if you want to larn how classify operating and nonoperating items and /or reorganize the fiscal statements..but lacks depth of analysis to claim to be a definitive book on valuation. For valuation,I would opt for Greenwald'due south "Value Investing" and Graham's "Security Assay" instead. ...more
I'm non saying this is a fun volume to read unless you lot notice swell joy in valuing companies. However, for those who employ this textbook for their studies or in their daily work, this is an invaluable volume to add together to your bookshelf. For what it is, information technology is a adequately piece of cake read - the authors treat the topic comprehensively without resorting to ponderous language but the insights gained from this book will be useful for many years to come. It's been years since I had to read this for a Masters in Financial Thou I'm not proverb this is a fun book to read unless you find smashing joy in valuing companies. Nonetheless, for those who use this textbook for their studies or in their daily piece of work, this is an invaluable book to add together to your bookshelf. For what it is, it is a fairly piece of cake read - the authors treat the topic comprehensively without resorting to ponderous language only the insights gained from this book volition be useful for many years to come up. Information technology's been years since I had to read this for a Masters in Fiscal Management course and I notwithstanding accept it lying around as a handy reference when I need it. ...more
A good primer that lays out a detailed way of looking at value creation by companies, including rigorous definitions of ROIC, FCF, etc. Useful processes for rearranging financial statements (largely simply not exclusively to dissever operating items from non-operating). There are some sections that are so technical as to be more useful as a reference than something fifty-fifty fiscal analysts are inclined to want to read, but an excellent volume overall.
My main remark is that the proposed valuation methods rely substantially on guessing the future, which is a very difficult matter to do.
My review is based on a very superficial read of the volume. The book is intended for practitioners and students, and I currently do not fit into these categories. I practise all the same accept a general interest in this topic.
Very good book on Valuation through DCF. Useful from beginners to somewhat intermediate users of the tool. The first half is non and then technical and discusses the topic in general, which I found very interesting. The second role is more than technical and gets into more than detail. More than useful as a book to have close when you demand something specific than to read information technology as a novel.
I will never forget this volume, particularly the affiliate Measuring The Value of Financial Institution. This was my main guide to work on my final paper nearly bank's valuation of intrinsic value. And I volition always remember anybody and everything helped me those days. What a memorable time. I will never forget this book, especially the chapter Measuring The Value of Financial Institution. This was my primary guide to work on my final newspaper nigh bank's valuation of intrinsic value. And I will always recall everyone and everything helped me those days. What a memorable time. ...more than
This is a must read for whatever serious practitioner of corporate finance. These are critical fundamentals frequently neglected by many in the profession. Theory defines how enterprise value is maximized. This book demonstrates how it is achieved.
The book is a textbook archetype on valuation, which helps a lot in my coursework. The author uses very clear language and prose and then that it'south not boring or confusing. Much recommended if you lot're into finance. The book is a textbook classic on valuation, which helps a lot in my coursework. The writer uses very clear language and prose so that it's not slow or disruptive. Much recommended if yous're into finance. ...more
Enjoyed this textbook. Supplemented my corporate finance assignments really well. Managed to grab a deeper understanding on concepts such equally WACC with a couple of really interesting theories. Not too hard to sympathise. Would love to re-visit this book for a refresher every at present and and then.
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