Quantitative Value Investing: Frameworks for stock valuation

Explore how ROIC drives company value through the DuPont components: profit margin, asset turnover, and leverage, while explaining sustainable growth, dividends, and retention.

Apply a valuation framework for mature growth firms using the dividend discount model and golden growth variant to estimate fair value from ROIC, earnings growth, and payout ratio.

Set the required rate of return using three practical approaches, including capm, simple risk-free rate multiples, and index benchmarks, with a course-wide target of 12 percent.

Apply the price-to-book framework to estimate fair market value for a mature growth company, using sustainable ROE, ROIC, and growth assumptions to compare FMV with market price.

Roll forward the fair market value estimate using the BBB model, updating book value and ROIC assumptions to capture growth, reinvestment, and the margin of safety.

Analyze cash hoarders by separating core operations from excess cash, valuing the business with a PPV-like framework, and analyzing how capital allocation drives ROIC and fair market value.

Assess mean reversion risks in ROIC and growth inputs for the BBB framework, and normalize margins while considering cyclicality and leverage.

Analyze debt paydown opportunities within a valuation framework, using free cash flow, depreciation, and maintenance capex to gauge ROIC. Use enterprise value to EBITDA to assess value capture.

Explore how stock buybacks function as a capital allocation tool that reduces shares outstanding, boosts return on equity, and can trigger valuation rerating, especially for cash-rich stocks.

Examine how regular buybacks in mature, low-capex industries raise valuation by reducing shares outstanding, boosting EPS and ROE, while improving capital allocation and tax efficiency for promoters.

Identify opportunities in stocks with large intangible assets by adjusting net worth, applying the PPV model, and analyzing cash flows and ROE trends beyond reported numbers.

Explore dividend aristocrats, mature companies with minimum capex, and apply a valuation framework that equates growing dividend streams to fixed-income yields, highlighting sustainability and growth assumptions.

Adjust the mature growth framework for high growth companies by using a two-stage price-to-book valuation with ROIC, high-growth and mature phases, and a conservative growth assumption.

Apply a modified framework to value a high growth company through a case study, deriving implied growth, price-to-book value, margins, and profitability to judge market price versus fundamentals.

Analyze how high growth and ROIC shape stock value through a case study, contrasting implied growth with market expectations to reveal buy and sell signals under growth-based valuation models.

Apply a quantitative framework to value commodity cyclical companies, focusing on cost of operations, leverage, and ROIC, while using price-to-book and dividends or buybacks to navigate cycles.

Size each stock as a portion of the portfolio using a framework that maximizes geometric return with the Kelly criterion. Prune positions to manage risk through edge and expected value.

Apply the Kelly criterion for stock position sizing using a payoff matrix, define risk appetite, compute allocation, and scale with the framework.

Compare two sector peers with a two-stage PPV model to reveal intrinsic value, fair market value, and margins of safety through ROIC, growth, and ROE.