Documentos de Académico
Documentos de Profesional
Documentos de Cultura
VALUATION
Its
all
rela3ve.
Financing Mix
17. The Trade off
18. Cost of Capital Approach
19. Cost of Capital: Follow up
20. Cost of Capital: Wrap up
21. Alternative Approaches
22. Moving to the optimal
Financing Type
23. The Right Financing
Investment Return
14. Earnings and Cash flows
15. Time Weighting Cash flows
16. Loose Ends
Dividend Policy
24. Trends & Measures
25. The trade off
26. Assessment
27. Action & Follow up
28. The End Game
Valuation
29. First steps
30. Cash flows
31. Growth
32. Terminal Value
33. To value per share
34. The value of control
35. Relative Valuation
3!
Multiple =
Revenues
a. Accounting
revenues
b. Drivers
- # Customers
- # Subscribers
= # units
Earnings
a. To Equity investors
- Net Income
- Earnings per share
b. To Firm
- Operating income (EBIT)
Cash flow
a. To Equity
- Net Income + Depreciation
- Free CF to Equity
b. To Firm
- EBIT + DA (EBITDA)
- Free CF to Firm
Book Value
a. Equity
= BV of equity
b. Firm
= BV of debt + BV of equity
c. Invested Capital
= BV of equity + BV of debt - Cash
4!
Too
many
people
who
use
a
mul3ple
have
no
idea
what
its
cross
sec3onal
distribu3on
is.
If
you
do
not
know
what
the
cross
sec3onal
distribu3on
of
a
mul3ple
is,
it
is
dicult
to
look
at
a
number
and
pass
judgment
on
whether
it
is
too
high
or
low.
5!
Deni3onal Tests
6!
8!
Descrip3ve Tests
The median for this mul3ple is o_en a more reliable comparison point.
Throwing
out
the
outliers
may
seem
like
an
obvious
solu3on,
but
if
the
outliers
all
lie
on
one
side
of
the
distribu3on
(they
usually
are
large
posi3ve
numbers),
this
can
lead
to
a
biased
es3mate.
600.
500.
400.
Current
Trailing
300.
Forward
200.
100.
0.
0.01
To
4
To
8
8
To
12
12
To
4
16
Aswath Damodaran!
16
To
20
20
To
24
24
To
28
28
To
32
32
To
36
36
To
40
40
To
50
50
To
75
75
To
100
More
10!
Analy3cal Tests
What are the fundamentals that determine and drive these mul3ples?
Proposi3on
2:
Embedded
in
every
mul3ple
are
all
of
the
variables
that
drive
every
discounted
cash
ow
valua3on
-
growth,
risk
and
cash
ow
pajerns.
In
fact,
using
a
simple
discounted
cash
ow
model
and
basic
algebra
should
yield
the
fundamentals
that
drive
a
mul3ple
The
rela3onship
between
a
fundamental
(like
growth)
and
a
mul3ple
(such
as
PE)
is
seldom
linear.
For
example,
if
rm
A
has
twice
the
growth
rate
of
rm
B,
it
will
generally
not
trade
at
twice
its
PE
ra3o
Proposi3on
3:
It
is
impossible
to
properly
compare
rms
on
a
mul3ple,
if
we
do
not
know
the
nature
of
the
rela3onship
between
fundamentals
and
the
mul3ple.
11!
DPS1
r g n earnings
per
share,
Dividing
both
sides
by
the
current
P0 =
= PE =
P0 =
r-gn
FCFE1
r gn
P0
(FCFE/Earnings) * (1+ g n )
= PE =
EPS0
r-g n
12!
PE=Payout Ratio
(1+g)/(r-g)
PE=f(g, payout, risk)
PEG=Payout ratio
(1+g)/g(r-g)
PBV=f(ROE,payout, g, risk)
Equity Multiples
Firm Multiples
V/FCFF=f(g, WACC)
Value/FCFF=(1+g)/
(WACC-g)
13!
Applica3on Tests
While
tradi3onal
analysis
is
built
on
the
premise
that
rms
in
the
same
sector
are
comparable
rms,
valua3on
theory
would
suggest
that
a
comparable
rm
is
one
which
is
similar
to
the
one
being
analyzed
in
terms
of
fundamentals.
Proposi3on
4:
There
is
no
reason
why
a
rm
cannot
be
compared
with
another
rm
in
a
very
dierent
business,
if
the
two
rms
have
the
same
risk,
growth
and
cash
ow
characteris3cs.
14!
Market Capitalization
Current PE
Trailing PE
Forward PE
Expected growth
PEG ratio
$126,427
20.60
20.60
18.40
12.40%
1.66
$70,451
9.93
11.51
19.70
20.90%
0.55
$56,889
18.84
14.53
15.50
12.60%
1.15
Viacom, Inc.
$35,492
14.82
14.82
14.80
13.10%
1.13
$4,300
30.19
29.53
28.50
17.60%
1.68
$4,270
18.40
19.87
19.40
20.00%
0.99
$4,068
NA
NA
NM
9.00%
NA
$3,445
20.40
21.44
16.60
14.80%
1.45
$3,089
21.33
18.06
17.70
10.00%
1.81
$2,764
NA
NA
43.30
82.30%
NA
$2,079
32.85
20.28
14.90
86.60%
0.23
$1,608
51.21
142.29
NM
20.00%
7.11
Rentrak Corporation
$648
NA
NA
152.80
115.00%
NA
$606
6.29
6.48
24.40
6.75%
0.96
Average
$22,581
22.26
29.04
32.17
31.50%
1.70
Median
$3,756
20.40
19.87
18.90
16.20%
1.15
15!
16!
Trading
at
0.67
3mes
book
equity,
Deutsche
looks
cheap,
rela3ve
to
the
rest
of
the
sector.
However,
part
of
the
reason
for
this
may
be
its
low
return
on
equity
of
-0.93%
in
2013.
Because
these
rms
dier
on
both
capital
policy
and
return
on
equity,
we
run
a
regression
of
PBV
ra3os
on
both
variables:
PBV
=
0.48
(2.63)
R2 = 23.66%
The
predicted
PBV
ra3o
for
Deutsche
Bank,
based
on
its
return
on
equity
of
-0.93
percent
and
its
3er
1
capital
ra3o
of
15.13%,
would
be
1.003.
Predicted
PBVDeutsche
Bank
=
0.48
+
1.58
(-0.0093)
+
3.55
(.1513)
=
1.003
Because
the
actual
PBV
ra3o
for
Deutsche
Bank
at
the
3me
of
the
analysis
was
0.67,
this
would
suggest
that
the
stock
is
under
valued,
rela3ve
to
other
banks.
17!
Task
Given
how
the
sector
in
which
your
rm
operates
is
being
priced,
es3mate
a
rela3ve
value
for
your
rm.
18!
Read
Chapter
12