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This 26-session equity valuation class will be starting February 3, 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
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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| Introduction to Class | ||
| Post-class test and solution. | ||
Valuation of the week # 1 |
Tesla: A Corporate Teenager |
Google Shared Spreadsheet |
2 (2/5/20)
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Valuation bias: A test and my solutions | |
The Bermuda Triangle of Valuation |
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| Post-class test and solution. | ||
| 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. | ||
| Cash flow consistency: A test (Congoleum) | ||
| DCF Big picture DCF inputs: The Discount Rate - Setting the table - Risk and the marginal investor |
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| Post-class test and solution. | ||
Valuation of the week # 2 |
Aramco: A loaded bet on Oil and the House of Saud |
Google Shared Spreadsheet |
| Risk Premiums: A test | ||
The Risk free Rate The Equity Risk Premium |
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| Post-class test and solution. | ||
Weekly Challenge #1 |
Reconciling firm and equity valuation |
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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 # 3 |
Heineken: Negative Interest Rates & Value |
Google Shared Spreadsheet |
| Country and Currency Risk | Lecture note packet 1: 55-78 | |
Country Risk and Company Risk Exposures |
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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 #5 |
Estimate a company's equity risk premium | |
| Beta and WACC: A test | Lecture note packet 1: 79-106 | |
| First steps on betas Measuring Relative Risk (Betas & Alternatives) The cost of debt |
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| Post class test and solution | ||
Valuation of the week # 4 |
A Market Crisis: The Corona Effect on the Market |
Google Shared Spreadsheet |
| Cash flows: A test | ||
Debt in Cost of Capital |
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| Post class test and solution | ||
| Review session for the first quiz | ||
| Weekly Challenge # 3 | Adjusting Operating Earnings |
Weekly challenge #3 Solution & Synthetic rating |
| Valuation Tools Webcast #5a 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 | |
| Valuation Tools Webcast #7 Capitalizing R&D expenses |
The process of converting R&D (and like expenses) from operating to capital expenses | |
| Cash Flows II: A test | Packet 1: Page 131-164 | |
Accounting Fraud & Negative Earnings |
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| Post class test and solution | ||
Valuation of the week #5 |
Google Shared Spreadsheet | |
9 (3/4/20) (Quiz in first 30 minutes of class) |
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. (Up after quizzes are ready to be picked up) | Packet 1: Pages 165-183 |
| Fundamental Growth Rates Top Down Estimates The Value of Growth |
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| Post class test and solution | ||
| Weekly Challenge # 4 | Estimating fundamental growth |
Weekly challenge Solution |
| 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. | |
| Start of the class test | Packet 1: Pages 184-215 | |
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 | |
Loose Ends in Valuation |
Packet 1: Pages 215-245 | |
| 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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| 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 |
|
12(3/23/20)
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Story Telling and Number Crunching | Packet 1: 246-264 |
Dealing with Employee Options & Restricted Stock |
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| Post class test and solution | ||
Valuation of the week #7 |
|
Google Shared Spreadsheet |
| Story Telling and Number Crunching | Packet 1: 265-287 | |
| Story breaks, shifts and changes Valuation 101 - Valuing the Market - Baby steps - Crisis Effects |
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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 | |
Second quiz |
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Valuing Declining & Distressed Companies |
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| Post class test and solution | ||
| Review session for the second quiz | ||
Valuation of the week #8 |
Valuing a Sports Franchise (from 2014) |
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| Price and Value: A Test | Packet 1: 302-327 | |
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 |
16 (4/6/20) (Quiz-shortened class) |
Take the second quiz (a or b) and check out the solution (a or b) as well as the distribution of grades for the class. | Packet 1: 328-339 |
Valuing Financial Service firms Valuing Companies with Intangible Assets |
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| No post class test or solution | ||
Valuation of the week #9 |
Valuing an IPO (Levi Strauss in 2019 & update for 2020) |
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| Relative Valuation I: Test | ||
The Essence of Pricing |
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| Post class test and solution | ||
Weekly Challenge #6 |
Multiple: Definitional test | Weekly Challenge Solution |
| Relative Valuation IIa: Test | ||
The Essence of Pricing |
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| Post class test and solution | ||
Valuation of the week #10 |
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| Relative Valuation IIIa: Test | Packet 2: 45-80 | |
More pricing examples |
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| Post class test and solution | ||
Weekly Challenge #7a |
Relative valuation | 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. | |
| Review session for the third quiz | ||
| Packet 2: 81-128 | ||
Pricing, relative Valuing Private Businesses |
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| Post class test and solution | ||
Pricing/Valuation of the week #11 |
Pricing Severstal (a Russian steel company) |
No Google shared spreadsheet |
| Private Company Valuation | Packet 2: 129-End | |
Private Company Valuaton |
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| Post class test and solution | ||
22 (4/27/20) (Shortened for quiz 3)
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Quiz 3. No start of the class test. | Packet 3: 1 -22 |
Real Options |
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| Post class test and solution | ||
| Real Options Test | Packet 3: 23-47 | |
Real Options |
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| Post class test and 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. | ||
Weekly Challenge #9 |
Patent valuation | Weekly Challenge Solution |
24 (5/4/20)
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Real Options Test | Packet 3: 48-83 |
The Option to Abandon The Value of Distressed Equity as an Option |
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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: 84-108 | |
Acquisition Valuation |
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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 |
The final exam was online & multiple choice. You can take the final exam & check the solution. |