Corporate Valuation Mastery - DCF | DDM | Relative Valuation

Learn relative valuation by comparing a firm's value to competitors, using multiples, exploring advantages and disadvantages, and applying practical examples and a comprehensive enterprise valuation from actual financial statements.

Learn two-component relative valuation: value assets with price-to-earnings, EV/EBITDA, price-to-sales, and price-to-book ratios, then compare to similar firms while accounting for differences in the array of products and risk.

Assess the advantages and disadvantages of relative valuation using multiples from comparable firms to reflect market mood, noting fewer assumptions, biases, and transparency issues.

Learn how relative value uses enterprise value and equity value to compare firms, calculating EV from market cap, debt, minority interest, and cash, then apply earnings multiples and book multiples.

Explore enterprise value ratios, including EV/EBIT, EV/EBITDA, and EV to cash flow, and learn how lower multiples signal value and how ratios vary by industry.

Compute enterprise value from market cap, debt, and cash; then use EV to cash flow, EV to EBITDA, and EV to sales to compare firms, including private data challenges.

Learn how to estimate enterprise value for a private company by data mining, using industry comparables from Hoover's, Yahoo, Manta, and Dun & Bradstreet, and building a summary matrix.

Calculate the price to earnings ratio, the oldest valuation metric, by dividing stock price by earnings per share, and note trailing, rolling, and forward P/E, including negative EPS cases.

Highlight the price to earnings ratio's ease of use and its use as a benchmark against industry peers, guiding interpretations of EPS growth and potential undervaluation.

Explore advantages and disadvantages of price-to-earnings ratio, including subjectivity, sensitivity to market sentiment and inflation, and how earnings versus market expectations drive overvaluation or undervaluation.

Define equity value as enterprise value minus debt plus cash and investments, and outline equity value multiples such as price to earnings, price to cash flow, and price to book.

Explore the price-to-book value ratio, defined as stock price divided by book value per share, linking market value to ROE, tangible assets, and the role of intangibles in valuation.

Explore the price to book value ratio, its advantage when earnings are negative, and usefulness in bankruptcy and mark-to-market contexts, alongside its drawbacks like missing intangibles and accounting differences.

Learn when to use the price-to-sales ratio to value firms with negative or volatile earnings, benefits of sales stability, and pitfalls from revenue manipulation and ignored profitability.

The price to sales ratio offers a meaningful view in distress or startup firms with unreliable earnings, but may be distorted by credit sales and revenue recognition.

Explain the peg ratio as a growth-adjusted valuation metric by dividing price-to-earnings by annual EPS growth, enabling comparison of stocks with different growth rates and introducing equity versus enterprise value.

Distinguish equity value from enterprise value and explain multiples: enterprise value uses sales, ebitda, ebit, fcf, capacity; equity value uses earnings, cash flow, sales, book value, peg, dividend yield.

Understand comparable company analysis as a relative valuation technique that values a company by comparing its valuation multiples with peers, using metrics like enterprise value and earnings per share.

Leverage comparable company analysis to derive a data-driven valuation range from widely available public data, while weighing its advantages and limitations for private firms and thinly traded shares.

Select universe of comparable companies, using listed peers or external effects, and consult sources like Bloomberg, FactSet, and company filings to refine by region, size, sector, products, customers, and geography.

Learn to source financial information for a peer group—from annual reports and Google to industry reports and parent data—then benchmark key ratios and valuation multiples.

Explore how to build a robust comparable analysis using 10–15 peers, construct benchmarking sheets, and derive target company equity and enterprise value from market data, margins, and LTM figures.

Learn to perform a comparable benchmarking analysis across target and peer companies, summarizing market valuation, financial metrics, margins, and key ratios in a multi-tab framework.

Explore a target sheet with hypothetical data to perform ratio, multiples, and comparable analysis, and calculate equity value and enterprise value from debt, cash, and balance sheet figures, P&L estimates.

Explore constructing the reported income statement within a broader corporate valuation framework, using three-year trends, current-year projections, and tax adjustments to derive ebit, net income, and diluted eps.

We show how to build an adjusted income statement by adding back non-recurring items, compute adjusted margins and net income, and derive diluted earnings per share from average diluted shares.

Build a cash flow statement with depreciation under straight-line method and capex as sales percentage. Determine the balance sheet and fully diluted shares outstanding, including in-the-money options for comparable analysis.

Analyze equity value and enterprise value from the balance sheet, and show how cash and sales changes shift metrics, including EV to sales, EV to EBITDA, and EV to EBIT.

Evaluate trading multiples such as EV to EBITDA and price-to-earnings, compute return on invested capital, return on equity, and return on assets, and assess valuation through growth and forward assumptions.

Build and analyze company A’s income statement and ratios for a hypothetical large-scale firm, using sales growth, COGS, SG&A, EBIT, taxes, and dividends to assess net income.

Learn how to compute adjusted gross profit, assess non-recurring items, and analyze margins, depreciation on a straight-line basis, and implied capital expenditure assumptions for fiscal years 2015 and 2016.

Examine balance sheet assumptions, including cash, receivables, inventories, fixed assets, and depreciation; analyze dilution and fully diluted shares, and derive EV to sales, EV to EBITDA, and P/E for benchmarking.

Develop a Company B financial model by projecting sales, margins, and capex, adjusting for debt, preferred stock, and diluted shares to derive equity value, enterprise value, and key valuation ratios.

Select market data in a hypothetical small-cap penny stock to calculate the income statement and balance sheet and derive ratios from sales, debt, depreciation, taxes, and expenses.

work through a balance sheet scenario for a leather-bags company, compute enterprise and equity value, and assess ev/sales and p/e to compare performance.

Explore benchmarking a target company against peers by linking equity and enterprise value to sales, and analyzing ebitda, gross profit, and net income using mean, median, and cap tiers.

Benchmark your target company against industry mean and median, compare key metrics like gross profit, EBITDA, and net income, and assess ROIC, ROE, ROA using pivot tables.

Use the output sheet to compute enterprise value, ebitda, and price multiples, then perform a comparable company analysis with benchmarking to decide if the target is worth investing.

Explore performing both DCF and relative valuation using an industry average sheet, including capitalization of operating leases and R&D expenses to assess industry-based insights.

This input sheet consolidates data from income statements and balance sheets, detailing assumptions and adjustments, non-cash working capital, and debt and equity values for valuation models.

The relative valuation sheet derives equity value and value per share by applying a 1.5 value-to-sales ratio to chosen-year revenue. It uses the cost of capital from the DCF valuation.

Explore the DCF valuation sheet and relative valuation multiples, calculating for ten years of revenue forecasts from growth rates such as CAGR and the terminal value under perpetuity assumptions.

Learn how to adjust ebit for operating leases and capitalize r&d and operating expenses in a dcf framework, then convert leases to debt, calculate present value, and derive operating margins.

Compute total capital invested by linking EBIT post taxes, depreciation, capex, and working capital changes; apply R&D capitalization, then estimate cost of capital via debt, leases, beta, and CAPM equity.

Compute reinvestment rate from ebit, capex, depreciation, and free cash flow to estimate return on capital; apply ten-year cash flows, wacc, and terminal value in a dcf and relative valuation.

Master the discounted cash flow method to value companies, project cash flows, terminal value, and compute WACC, cost of debt, and cost of equity using an Excel case study.

Discover how financial modeling underpins valuation in this course, and compare absolute methods like DCF and DDM with relative valuation to estimate intrinsic value.

Explore absolute valuation methods, including the discounted dividend model and asset-backed valuation, contrast liquidation versus going-concern value, and introduce discounted cash flow and relative valuation concepts.

Master relative valuation with comparable companies analysis and precedents, guided by the law of one price, using EV/EBITDA and peer comparisons to judge undervaluation, noting limitations.

Learn how the DCF method estimates a company's value by discounting future cash flows to present value. Compare this value to market price to identify undervaluation and set a benchmark.

Explore how the dcf method projects future unlevered cash flows, discounts them to present value, includes terminal value, and uses the weighted average cost of capital as the discount rate.

Explore how rising cash flows boost company value in the DCF framework, and apply present value and terminal value concepts to perpetual growth scenarios.

apply a terminal value in dcf analysis by projecting cash flows for a finite period, then grow at a stable rate and discount to present value using a discount rate.

Explore intrinsic dcf valuation, assessing unlevered cash flows with wacc, and compare two-stage and three-stage models for enterprise value versus levered equity value.

Explain how equity valuation and firm valuation yield the same value under consistent assumptions; apply dcf with levered or unlevered cash flows discounted at cost of equity or wacc.

Explain the accounting equation, where assets equal liabilities plus equity, and illustrate with cases: asset purchase financed by debt, inventory changes, and revenue affecting cash and retained earnings.

Explore the advantages of the discounted cash flow method, which yields intrinsic value from cash flows and fundamentals, models synergies easily, and complements other valuation methods like comps and lbo.

Compare DCF and comps to identify when DCF is preferred for intrinsic and absolute valuation, theoretical soundness, and synergies, versus comps for ease and market-based relative valuation insights.

Explain the four key DCF inputs—cash flows, growth rate, stabilization timing, and discount rate—and show how to discount them with a terminal value to derive enterprise and equity value.

Learn to determine free cash flows from the Siemens case study by analyzing revenues, expenses, working capital, and capex. Apply FCF in a DCF framework to value the firm.

Understand how to estimate enterprise value and equity value from free cash flows, decide when to use fcff or fcfe, and adjust for depreciation, after-tax interest, and capex.

Explore how DCF predicts cash flows by adjusting CapEx for asset disposals, incorporating working capital changes, and deriving free cash flow from operations via indirect and direct methods.

Compare two methods for forecasting free cash flows, favoring the approach that predicts growth of underlying line items like revenue and net income, using case study insights.

Predict Siemens' cash flows using a linked financial model that derives free cash flow from ebit after tax (nopat), working capital changes, and capital expenditures.

Build a five-year cash flow model for a case study, calculating CFO and FCF from EBIT after tax, incorporating depreciation, amortization, capital expenditure, and intangible assets.

Predict terminal value using the going concern principle, a finite horizon, and discounting cash flows to present value. Identify three terminal value methods: stable growth, multiples approach, and liquidation value.

Explore four methods to calculate terminal value, including the Gordon growth formula, multiples, book value, and liquidation value, with Excel demonstrations and sensitivity to growth and discount rates.

Explore three methods to estimate terminal value growth in dcf: rr × roe, stable historical/gdp growth, or a risk-free rate, with r > g and g ≤ gdp.

Explore the discount factor concept and present value to determine terminal value using the perpetuity formula and exit EBITDA multiple in a case study, with WACC and growth rate.

Build a dcf model to value a company using free cash flow, terminal value via wacc minus g, and an exit EBITDA multiple, then compute equity value and per-share price.

Calculate net debt from the latest 10-K/10-Q filings, including cash and debt while adjusting for convertibles and preferred stock and considering noncontrolling interest, using quarterly data for a WACC valuation.

Explain how to estimate the cost of debt for WACC, detailing after tax cost, tax shield, and methods using yield to maturity, bond ratings, and market benchmarks.

Explore three methods to estimate cost of debt: bond yield, rating-based default spread, and synthetic rating, then compute pre- and after-tax cost using interest coverage, risk-free rate, and tax rate.

Master the cost of equity estimation, including the build-up method and CAPM, and explore beta, market risk premium, size premium, and Gordon growth.

Understand beta as the market-relative measure of systematic risk, a core CAPM input, shaped by cyclicality and leverage, calculated via regression.

Explore levered and unlevered beta calculation using industry betas, and determine market-value weights of equity and debt to compute the wacc for corporate valuation.

Finalizes the case study by calculating fair value per share from enterprise value and net debt, adjusting diluted shares via the treasury stock method, and assessing wacc and beta-driven sensitivities.

Explore sensitivity analysis in a DCF framework by varying growth rate and WACC to see share price responses, build a table, and use conditional formatting to signal buy or sell.

Adjust discounted cash flow analysis for preferred stock, revise the cost of capital, and apply football field analysis to compare valuation methods and assess DCF limitations.

Master common investment banking and equity research interview questions, including cost of equity vs debt, a dcf walkthrough, and Miller–Modigliani propositions for capital structure.