Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
2 To compute the cost of debt for Titan, we added an estimateddefaultspreadof0.5percent(basedonthesynthetic ratingofAAforTitan)f ...
bankruptcies,thedirectcostofbankruptcyseemstobeabout 5 percent. 8 A. Shapiro, Modern Corporate Finance (New York: Macmillan,1989 ...
13 F. Modigliani and M. Miller, “The Cost of Capital, Corporation Finance and the Theory of Investment,” American Economic Revie ...
PART TWO Relative Valuation Inrelativevaluation,wevalueassetsbased onhowsimilar assets arepriced. Webegin this section, in Chapt ...
CHAPTER 7 Relative Valuation: First Principles Indiscountedcashflowvaluation,theobjectiveistofindthe value of an asset, given it ...
Inrelativevaluation,wevalueanassetbasedonhowsimilar assetsarepricedin themarket.Aprospective housebuyer decideshowmuchtopayforah ...
differencesinpricingacrossstockscanbeattributedtoallof thefundamentalsthatwetalkedaboutindiscountedcashflow valuation. Higher-gr ...
reports in early 2001, relative valuations outnumbered discounted valuations almost 10 to 1. 1 While manyequity researchreports ...
Whyistheuseofrelativevaluationsowidespread?Whydo managersandanalystsrelatesomuchbettertoavaluebased onamultipleandcomparablestha ...
multipleoftencomesfromwhatthemarketispaying forsimilarfirms.Itcanbearguedthatthebruntofthe responsibility in a relative valuatio ...
themarketmoodalsoimpliesthatusingrelativevaluationto estimatethevalueofanassetcanresultinvaluesthataretoo highwhenthemarketisove ...
firmsgenerate,ortomeasuresthatarespecifictofirmsina sector. Earnings Multiples Oneofthemoreintuitivewaystothinkofthevalueofany a ...
payforastockandthebookvalueofequity(ornetworth)as a measure of how over- or undervalued a stock is; the price-to-bookvalueratiot ...
Whereasearnings,bookvalue,andrevenuemultiplescanbe computedforfirmsinanysectorandacrosstheentiremarket, there aresome multiples ...
Multiplesareeasytouseandeasytomisuse.Therearefour basicstepstousingmultipleswiselyandfordetectingmisuse in thehands ofothers. Th ...
someoftheP/EratiosforGoogleinNovember 2005 using different estimates of earnings per share. FIGURE 7.1Google—P/E Ratios in Novem ...
Consistency Every multiple has a numerator and a denominator. The numeratorcanbeeitheranequityvalue(suchasmarketprice orvalueofe ...
inconsistencydoesnotmattersincethemultipleiscomputed thesamewayforallofthecomparablefirms;buttheywould bewrong.Ifsomefirmsonthel ...
Even with the same accounting standards governing companies, there can be differences in firms that arise becauseofdiscretionary ...
an awareness of howmultiplesvary across sectors canbe veryusefulindetectingwhenthesectoryouareanalyzingis over- or undervalued. ...
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