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This 28-session equity valuation class will be recorded starting January 27, 2020, and the lectures are accessible in multiple ways. You can get the supporting lecture notes by clicking on the pdf files below - the pages covered by each lecture are provided next to each lecture. For the syllabus and other details, visit the home page .
Lecture Notes
Webcasts
This page will include the webcasts from the current class. The webcasts
can be accessed in one of four ways:
Options for following class
You can follow this class in other forums. One is iTunes U, where you can watch the webcasts and follow the class on your tablet or even smartphone. The other is YouTube.
Finally, you can read the emails that I send to the class by this link.
| Session Webcasts | Topics covered | Lecture notes |
Preview of the class |
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| Valuation: Priors and Preconceptions | ||
| Introduction to Class | ||
| Post-class test and solution. | ||
Valuation of the week #1 |
A Jedi Valuation of Star Wars (Old and you are welcome to update, now that the series has played out) |
Google shared spreadsheet |
2 (1/29/20) The sound system failed catastrophically & the sessions recordings are uselesss. I have posted a recorded version of the session that I did last year. Sorry.
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Valuation bias: A test and my solutions | |
Why bother (with valuation)? |
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| Post-class test and solution. | ||
Valuation Tools Webcast #1 Getting Data for Valuation |
Data collection: The first step In this webcast, I look at the basics of getting the raw material needed for valuing a business - financial statements, sector information and macro economic data. |
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3 (2/3/20) |
No start of the class test today (to make up for time lost in last session) | |
Pricing Set Up |
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| Post-class test and solution. | ||
Valuation of the week # 2 |
Tesla: A Corporate Teenager |
Google Shared Spreadsheet |
| Cash flow consistency: A test (Congoleum) | ||
Risk Perspectives |
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| Post-class test and solution. | ||
Weekly Challenge #1 |
Reconciling firm and equity valuation |
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| Much of the raw material (data) that we use for valuation comes from annual reports and financial filings. (10, 10Q). In this presentation, I lay out a template for extracting information from these filings, separating the stuff that matters from the stuff that does not, using P&G in September 2012 as an illustration. | ||
| Risk Premiums: A test | ||
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| Post class test and solution | ||
Valuation of the week # 3 |
Aramco: A loaded bet on oil and the House of Saud |
Google Shared Spreadsheet |
| Betas and cost of capital: A test | Lecture note packet 1: 75-97 | |
| Measuring Relative Risk (Betas & Alternatives) The cost of debt |
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| Post class test and solution | ||
| Weekly Challenge # 2a | Implied Premium versus Riskfree Rate |
Implied premium challenge, data and solution |
Valuation Tools Webcast #3 Estimating a risk free rate |
Estimating a risk free rate |
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| Valuation Tools Webcast #4 Implied Equity Risk Premiums |
The logic and the measurement questions behind equity risk premiums are examined in this webcast. | Presentation Spreadsheet S&P 500 on buybacks S&P 500 earnings |
Valuation of the week # 4 |
Heineken: Negative Interest Rates & Value |
Google Shared Spreadsheet |
| Cash flows: A test | ||
Subsidized Debt |
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| Post class test and solution | ||
| Weekly Challenge # 3 | Adjusting Operating Earnings |
Weekly challenge #3 Solution & Synthetic rating |
| Valuation Tools Webcast #5 Trailing 12 month earnings |
How to use financial statements to create trailing 12 month numbers | |
| Valuation Tools Webcast #6 Converting leases to debt |
The process of converting operating lease commitments to debt | |
| Cash Flows II: A test | Packet 1: Page 125-144 | |
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| Post class test and solution | ||
| Review session for the first quiz | ||
Valuation of the week # 5 |
A Market Crisis: The Corona Effect on the Market |
Google Shared Spreadsheet |
| Growth Rates: A Test | Packet 1: Pages 145-185 | |
| Free Cashflows to Equity Historical Growth Rates Analyst Estimates of growth Fundamental growth rates - Growth in earnings per share - Growth in non-cash net income - Growth in operating income |
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| Post class test and solution | ||
| Weekly Challenge # 4 | Estimating fundamental growth |
Weekly challenge Solution |
| Valuation Tools Webcast #7 Capitalizing R&D expenses |
The process of converting R&D (and like expenses) from operating to capital expenses | |
| Valuation Tools Webcast #8 Estimating accounting returns (ROE, ROIC) |
In assessing whether a company's existing investments are good or not, we draw on accounting return measures: return on invested capital and return on equity. However, navigating what should be in invested capital and what should not, and how to adjust for accounting inconsistencies is tricky. | |
10 (3/2/20) (Quiz in first 30 minutes) |
Take the first quiz (a or b) and check out the solution (a or b) as well as the distribution of grades for the class. | Packet 1: Pages 185-202 |
Fundamental growth rates - Efficiency growth - Growth when margins are changing Terminal Value: Constraining Rules |
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| Post class test and solution | ||
Valuation of the week #6 |
Google Shared Spreadsheet | |
| Terminal Value: A Test | Packet 1: Pages 203-226 | |
Terminal Value: Final Thoughts |
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| Post class test and solution | ||
Weekly Challenge #4a |
Terminal Value | Weekly challenge Solution |
| The terminal value is a "big" number in DCF valuation, but it is subject to misuse and manipuluation. In this session, I take a look at how you can detect problems with a terminal value computation (in both your own DCFs and in other people's DCFs) | Sample DCF valuation Terminal value analyzer |
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| More Loose Ends: A Test | Packet 1: 227-250 | |
| Cross Holdings Other Assets Complexity Debt & Legal Jeopardy Dealing with Employee Options & Restricted Stock |
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| Post class test and solution | ||
Valuation of the week #7 |
Google Shared Spreadsheet | |
| Narrative & Numbers - Why stories matter in valuation - Steps in going from story to valuation - The Feedback Loop |
Packet 1: 251-270 | |
| Post class test and solution | ||
| When companies compensate employees with options, they create a second claim on equity. When valuing common shares in these companies, you have to incorporate the effect of options outstanding on equity value and I try to look at how in this webcast. | Cisco 10K Option spreadsheet |
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| Story Telling and Number Crunching | Packet 1: 271- 292 | |
| Valuing a stable growth, dividend paying company Valuing the market First steps into the dark side - Valuing Young companies |
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| Post class test and solution | ||
| Review session for the second quiz | ||
Valuation of the week #7 |
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Google Shared Spreadsheet |
| Packet 1: 293-318 | ||
| Valuing young companies & start-ups Valuing mature companies in transition |
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| Post class test and solution | ||
Weekly Challenge #5 |
Management Options and Equity Value | |
| In this session, I use the spreadsheet that I built to value a company, adapted fro the earnings shock that is coming from the crisis and higher risk premiums to value Boeing. In the process, you may be able to get ideas on how to build your own or adapt this one to make it better. | Spreadsheet | |
16 (3/30/20) (Shorter session)
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Second quiz |
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Valuing Emerging Market Companies |
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| No post class test & solution | ||
Valuation of the week #8 |
Valuing a Sports Franchise (from 2014) |
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| Price and Value: A Test | Packet 1: 332-360 | |
Valung Emerging Market Companies |
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| Post class test and solution | ||
Valuation Tools Webcast #11: EV, Firm Value and Equity Value |
The "value" embedded in a multiple can be the value of the entire firm, the value of its operating assets (enterprise value) or the value of the equity. In this webcast, we look at the differences between the three and why you may use one over the other. | Blog post on topic Presentation Excel spreadsheet |
| Relative Valuation I: Test | ||
The Essence of Pricing |
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| Post class test and solution | ||
Valuation of the week #10 |
Valuing an IPO (Levi Strauss in 2019 & update for 2020) |
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| Relative Valuation IIa: Test | Packet 2: 29-63 | |
| Defining comparable firms Controlling for differences Pricing examples |
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| Post class test and solution | ||
Weekly Challenge #6 |
Multiple: Definitional test | Weekly Challenge Solution |
Valuation Tools Webcast #12: Multiples and Fundamentals - Analyzing relationships |
When asked the value a company, relative to other companies, one of the biggest challenges you face is in assessing and analyzing the data. In this presentation, I looks at steps in analysis. | |
20 (4/13/20) (Recorded class from last year)
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Relative Valuation IIIa: Test | Packet 2: 64-120 |
More pricing examples |
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| Post class test and solution | ||
Valuation of the week #11 |
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21 (4/15/20) (Recorded class from last year)
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Private Company Valuation | Packet 2: 121-163 |
Valuing Private Businesses |
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| Post class test and solution | ||
Weekly Challenge #7a |
Relative valuation | Weekly challenge Solution |
| Weekly Challenge # 8 | Relative Valuation versus DCF valuation | Weekly challenge Solution |
| Review session for the third quiz | ||
| Real Options Test I | Packet 3: 1-36 | |
| The Essence of Real Options Tests for Real Options The option to delay (and valuing patents) |
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| Post class test and solution | ||
Pricing/Valuation of the week #12 |
Pricing Severstal (a Russian steel company) |
No Google shared spreadsheet |
| Real Options: A Test | Packet 3: 37-76 | |
| The Option to Delay - The Set up - Patents as Options - Valuing a company with patents - Undeveloped Natural Resource Reserves |
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| Post class test and solution | ||
Weekly Challenge #9 |
Patent valuation | Weekly Challenge Solution |
| The exclusive rights to produce a product or provide a service can provide the owner with "optionality", allowing for a premium on top of a discounted cash flow value. In this webcast, I look at a simplified example. | ||
24 (4/27/20) Shortened due to quiz
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Quiz 3: Shortened class | Packet 3: 77-83 |
| The Option to Delay - The Set up - Patents as Options - Valuing a company with patents - Undeveloped Natural Resource Reserves |
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| Post class test and solution | ||
| Quiz 3: Shortened class | Packet 3: 84-102 | |
| The Option to Delay - The Set up - Patents as Options - Valuing a company with patents - Undeveloped Natural Resource Reserves |
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| Post class test and solution | ||
| With money-losing companies, with a lot of debt, equity takes on the characteristics of a call option (to liquidate the business). In this webcast, I look at the mechanics of applying this approach to a troubled company. | ||
| Acquisition tests | Packet 3: 103-139 | |
Acquisition Mistakes Value Enhancement |
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| Post class test and solution | ||
| Value Enhancement: Test | Packet 3: 140-End | |
Acquisition Mistakes Value Enhancement |
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| Post class test and solution | ||
Review session for the final exam |
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| Project summaries (for entire class) | ||
Closing Presentation |
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Final Exam (5/15/17) |
The final exam was online, and multiple choice. You can take this final exam instead & check the solution. |