Articles on Equity Valuation

Equity Valuation: Definition, Importance and Process

Throughout finance, one rule always holds true. The general belief is that the value of any asset or security is...

Market Value, Intrinsic Value and Investment Value

Equity valuation or the valuation of any asset is an art. Valuation is not a perfect science and there is...

Applications of Equity Valuation

“Valuation” or the process of assigning a fixed numerical value to the present and potential of a business is considered...

Assumptions Used In Equity Valuation

Equity valuation is about guessing what the value of an organization is expected to be a decade from now or...

Qualitative Issues While Conducting Equity Valuation

Equity valuation focuses on estimating what the likelihood of the company being a successful enterprise in the future is. Now,...

Intrinsic Value and Mispricing

The whole objective of equity valuation is to find mispriced securities. Investors can make abnormal profits when they find securities...

Choosing a Valuation Model

Now, since we are aware that there are actually multiple models that can be used to value any given company...

Sum of the Parts Valuation

Equity valuation is usually conducted for an entire enterprise. For instance, if we are trying to come up with a...

Dividend Discount Model: Advantages

Dividend discount models are the first type of discounted cash flow models that we will study. The model simply discounts...

Dividend Discount Model: Disadvantages

The dividend discount model also has its fair share of criticism. While some have hailed it as being indisputable and...

Single Period Dividend Discount Model

To understand the dividend discount model, we need to start from the basics. The simplest way to understand the dividend...

Two Period Dividend Discount Model

The next step towards understanding the dividend discount model is to extend the conclusions derived from the single step dividend...

Dividend Discount Generic Model

In the previous two articles, we saw how information regarding the possible future price, dividends and rate of return expected...

Dividend Discount Model: Gordon Growth Rate

In the previous article, we became aware that the value of a stock can be split into two parts. One...

Gordon Growth Model: Pros and Cons

The Gordon growth model is a well known and widely known model for valuing equity securities. However, as with every...

Valuing Preference Shares Using Dividend Discount Model

The dividend discount model is also used to measure the value of preference equity in addition to forecasting the value...

Link between Present Value of Growth Opportunities (PVGO) and Dividend Valuation

Valuing a corporation is a complex exercise. This is partly because there are multiple ways of looking at the same...

Dividend Discount Valuation: H Model

The dividend discount model makes a lot of assumptions. Some of these assumptions are not considered to be viable by...

Phases of Growth and Valuation Models

Dividend discount models are based on the assumption of constant or linear growth. However, a mere look at the empirical...

Dividend Discount Model: Share Repurchase Programs

In corporate finance we studied that companies had an option when it came to compensating their equity shareholders. They could...

Implied Dividend Growth Rate

We are now aware of the various models that are used for equity valuation like Gordon model, H model, 2...

Sustainable Growth Rate: Concept

We have studied the various discounted cash flow valuation models in this module. These different models need to be applied...

Sustainable Growth Rate and the Du-Pont Analysis (PRAT Model)

We now have a basic understanding of the concept of sustainable growth rate and how it related to the valuation...

Spreadsheet Modeling: Dividend Discount Model

In the past few articles, we have studied about the various models that are available to help us predict the...

Estimating Future Dividends

We have discussed various types of dividend payout models. We have discussed the Gordon growth model, the H model, one...

Why Is Free Cash Flow Approach Better Than Dividend Discount Models?

The dividend discount models assume that the investors have no control over the payout policy of the firm whatsoever. This...

Free Cash Flow to the Firm vs. Free Cash Flow to Equity

Free cash flow models can be further categorized into two types. There are certain kinds of models which pertain to...

Calculating Free Cash Flow to Firm: Method #1 (Contd): Treatment of Fixed Capital Expenditure

In the previous article we learned that free cash flow to the firm is closely related to the concept of...

Calculating Free Cash Flow to the Firm: Method #2: Cash Flow From Operations

Now, it’s time to move on to the second metric which can be used to derive the free cash flow...

Calculating Free Cash Flow to Firm: Method 3: EBIT

In the previous articles, we learned about how to calculate the cash flow from operations if the cash flow statement...

Calculating Free Cash Flow to Equity

We studied the different methods to calculate the free cash flow to the firm (FCFF) in the previous articles. In...

Calculating Free Cash Flows: The Case of Preferred Shares

In the previous few articles we understood how to calculate free cash flows which accrue to the firm as a...

Changes in Financing Policy: Effect on Free Cash Flow

While valuing firms, free cash flow has to be calculated over a number of years. Hence, there is a good...

Single Stage FCFF Model

We now have a fair understanding of what the concepts of free cash flow to the firm is. We also...

Single Stage FCFF Model to Equity Valuation

Just like we have the single stage Free Cash Flow to the Firm (FCFF) model, we also have the Free...

Variations in Cash Flow Models

We are now aware of how to use the basic single stage models for both free cash flow to the...

How to Value Companies like Netflix?

Netflix is one of the largest providers of content in the world. This is amazing given the fact that content...

Dividend Discount Models: Some Points to Consider

Dividend discount models are amongst the oldest category of valuation models that have been used by the market. However, there...

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Articles on Equity Valuation