F u ndamental Val u ation : Anal yz ing Projections E QU ITY VAL U - PowerPoint PPT Presentation

F u ndamental Val u ation : Anal yz ing Projections E QU ITY VAL U ATION IN R Cli � Ang Senior Vice President , Compass Le x econ

Anal yz ing Projections Projections are critical inp u t in disco u nted cash � o w anal y sis Garbage - In → Garbage - O u t Approaches to Anal yz ing Projections Vis u al Inspection Regression Anal y sis EQUITY VALUATION IN R

Let ' s practice ! E QU ITY VAL U ATION IN R

F u ndamental Val u ation E QU ITY VAL U ATION IN R Cli � Ang Senior Vice President , Compass Le x econ

F u ndamental Val u ation techniq u es Free Cash Flo w to Eq u it y ( FCFE ) Di v idend Disco u nt Model ( DDM ) EQUITY VALUATION IN R

Free Cash Flo w to Eq u it y Model Recap Val u e of Firm ' s Eq u it y eq u als Present Val u e of Free Cash Flo w s to Eq u it y disco u nted at the Cost of Eq u it y T ∑ t T V = FCFE /(1 + k ) + [( FCFE (1 + g )/( k − g )]/(1 + k ) t e T e e t =1 Steps : FCFE d u ring projection period Terminal Val u e Add the t w o together to get Eq u it y Val u e EQUITY VALUATION IN R

Di v idend Disco u nt Model Recap Val u e = PV of Projected Di v idend Pa y ments Shortc u t for di v idends gro w ing at a constant rate : div (1 + g ) t V = ( k − g ) e EQUITY VALUATION IN R

Let ' s practice ! E QU ITY VAL U ATION IN R

Relati v e Val u ation E QU ITY VAL U ATION IN R Cli � Ang Senior Vice President , Compass Le x econ

Val u ation Using M u ltiples Relati v e Val u ation is based on the la w of one price Identif y ing comparable companies is cr u cial P / E and P / B Ratios are t w o of the most common v al u ation m u ltiples Res u lting v al u ation is " implied " EQUITY VALUATION IN R

Let ' s practice ! E QU ITY VAL U ATION IN R

Congrat u lations ! E QU ITY VAL U ATION IN R Cli � Ang Ssenior Vice President , Compass Le x econ

For f u rther st u dies ... EQUITY VALUATION IN R

Good l u ck ! E QU ITY VAL U ATION IN R