Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
inthetwoperiodsandtheaveragecorrelationacrossthetwo periods was close to zero (0.02). Ifpastgrowthinearningsisnotareliableindica ...
smallerfirms thantheyarefortherestofthemarket.This wouldsuggestthatyoushouldbemorecautiousaboutusing past growth, especially in ...
difficult to maintain historical growth rates as the firms double or triple in size. Thetrue testfor a small firmlies in howwell ...
expectedtobeunbiasedaboutthecompany’sfuture prospectsand,byextension,theirownmanagement skills.Alltoooften,managementforecastsre ...
areexpecting its earningsgrowthto be over the nextfive years. Information Advantages Thereareanumberofreasonstobelievethatanalys ...
theUnitedStates,however, firms routinely convey private information to analysts following them. Modelsforforecastingearningstha ...
summarizes forecasts of earnings from more than 50 investmentfirms.Theymeasurethesquaredforecast errors bymonthoftheyearandcompu ...
basisforarguingthatanalystpredictionsofgrowthratesmust bebetterthanpredictionsusingmodelbasedontimeseriesor other historical dat ...
With both historical and analyst estimates, growth is an exogenousvariablethataffectsvaluebutisdivorcedfromthe operating details ...
where gt= Growth rate in net income NIt= Net income in yeart Giventhedefinitionofreturnonequity,thenetincomein yeart− 1 can be w ...
Chase),arealestateinvestmenttrust(REIT)(Vornado),anda telecommunications firm (Verizon). The following table summarizes the retu ...
Dividingthis numberby thenet income gives us a much broader measure of the equity reinvestment rate: Unliketheretentionratio,thi ...
Theplusesand minusesofthis approacharevisiblein the table.Theapproachmuchmoreaccuratelycapturesthetrue reinvestmentinthefirmbyfo ...
8 UsingthisexpandedversionofROE,thegrowthratecanbe written as: Theadvantageofthisformulationisthatitallowsexplicitly for changes ...
returnonequitymeasuresthequalityofbotholderprojects thathavebeenonthebooksforasubstantialperiodandnew projectsfrom morerecent pe ...
Changeinbookvalueofequityfrom 2003 to 2004 =26,888− 22,913 = $3,975 million Totheextentthatthemarginalreturnonequityrepresentsth ...
productofthereturnonequityinperiodtandtheretention ratio. Whileincreasingreturnonequitywillgenerateaspurtinthe growthrateinthepe ...
After next year, the growth rate will subside to a more sustainable 4.15% (0.12 × 0.3462). How wouldthe answerbe different if th ...
Stable Return on Capital Scenario When a firm has a stable return on capital, its expected growthinoperatingincomeisaproductofth ...
mayyieldabettermeasureofthefuture.Inaddition,asfirms growandmature,theirreinvestmentneeds(andrates)tendto decrease.Forfirmsthath ...
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