Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

Variable
Ignored

Companies That Will

Look Cheap

Companies That Will

Look Expensive

Expected
growth rate
during
high-growth
period

Low-growth

companies (with P/E,

P/BV and PS)

High-growth companies

(with P/E, P/BV and PS)

High-growth

companies (withPEG

ratios)

Low-growth companies

(with PEG ratios)

Length of
growth
period

Companies with

minimalorshort-lived

competitive

advantages

Companies with strong

and sustainable

competitive advantages

Risk of
equity

Companies with high

equity risk, either

because they are in

riskier businesses or

because they have

high debt ratios

Companies with low

equity risk, either

because they are in

more stable businesses

orbecausetheyareless

financially levered

Return on
equity

Companies that earn

lowreturnsonequity,

relative to theircosts

of equity

Companies that earn

high excess equity

returns

Net profit
margin

Companies thatadopt

volume leader

strategies (high

volume, low price)

Companies that adopt

price leader strategies

(low volume, high

price)