littlebookThe Little Book of Valuation

A Preface

In my other books on Valuation (Investment Valuation, Damodaran on Valuation and the Dark Side of Valuation), I have written about how best to value companies and securities. Those books were directed primarily at analysts and practitioners, whose interests lie primarily in the practice of valuation. Consequently, they are filled with details that are useful (I think) to the valuation practitioner but not necessarily for investors. The average investor has a less intense need for valuation details and is more interested in learning valuation basics that he or she can apply quickly to differentiate between investments.

In the Little Book of Valuation, I have tried to distil the fundamentals of valuation (without glossing over or ignoring key components) and develop models that investors can understand easily and use quickly (with relatively few inputs). In the process, I hope to give investors the tools to not only value a company quickly but to also to critically review valuations done by others.

Rather than structure the discussion around different models, I have looked at valuation approaches have to be adapted as companies move through the life cycle and how they might vary across sectors. With each category of companies, I extract from the valuation basics what I term “value drivers” which may be helpful in picking the companies with the most profit potential.