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Web Casts: Valuation - Spring 2015
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This 26-session equity valuation class will be taped starting February 2, 2015, 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
.
Introduction to Valuation
Part
I: Discounted Cashflow Valuation: This is a pdf file and works well if you have an iPad or tablet to read it on If you have trouble printing this file, download the powerpoint file. You can then choose to print the slides, one to a page, two or a page, in note format or whatever your heart desires. (Updated for Spring 2015 class).
Part
II: Relative Valuation and Private Company Valuation : This is a pdf file and works well if you have an iPad or tablet to read it on If you have trouble printing this file, download the powerpoint file. You can then choose to print the slides, one to a page, two or a page, in note format or whatever your heart desires. (Updated for Spring 2015 class).
Part
III: Real
Options, Acqusition Valuation and Value Enhancement : This is a pdf file and works well if you have an iPad or tablet to read it on If you have trouble printing this file, download the powerpoint file.You can then choose to print the slides, one to a page, two or a page, in note format or whatever your heart desires. (Updated for Spring 2015 class).
Part
IV: Closing Presentation
Webcasts
This page will include the webcasts from the current class. The webcasts can be accessed in one of three ways:
Options for following class
You can follow this class in other forums. One is Yellowdig, an online site, where you can post your thoughts on the class topics and participate in discussions. The other is iTunes U, where you can watch the webcasts and follow the class on your tablet or even smartphone.
Finally, you can read the emails that I send to the class by this link,as well as the newsletters for the class.
| Session Webcasts | Topics covered | Lecture notes |
| Introduction to Class |
Syllabus
for class |
|
| Post-class test and solution. | ||
Valuation of the week # 1 |
Narrative and Numbers |
Google Shared Spreadsheet |
| Valuation bias: A test and my solutions | Introduction to Valuation (7-End) Lecture Note Packet 1 (Pages 1-4) |
|
The Bermuda Triangle of Valuation |
||
| Post-class test and solution. | ||
Weekly Challenge #1 |
Reconciling firm and equity valuation |
Weekly challenge #1 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. |
SEC website SEC Live FRED (Federal Reserve) |
3 (2/9/15)
(Audio is too low. Sorry about that. Will fix before next session) |
Cash flow consistency: A test (Congoleum) | Lecture note packet 1: Pages 5-40 |
| DCF Big picture DCF inputs: The Discount Rate - Setting the table - Risk and the marginal investor - The riskfree rate |
||
| Post-class test and solution. | ||
Valuation of the week # 2 |
A Case Study in Value Destruction |
Google Shared Spreadsheet |
| Risk Premiums: A test | Lecture note packet 1: Pages 40-59 | |
| The Equity Risk Premium - Historical Risk Premiums - Country risk premiums & measuring exposure |
||
| Post-class test and solution. | ||
| Weekly Challenge #2 | Country risk and risk premiums | Weekly challenge # 2 Solution |
Valuation of the week #3 |
Time Warner - Comcast Merger Synergy?
My update from February 2015
|
Google shared spreadsheet |
| Implied Equity Risk Premiums: A test | Lecture note packet 1: 60-81 | |
| Implied Equity Risk Premiums - More on estimation - Interaction with other "risk" premiums First steps on betas |
||
| 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 |
|
Valuation Tools Webcast #4 |
Separating wheat (information) from chaff (data) Changes in accounting and disclosure requirements have bulked up annual reports and 10Ks. While increased disclosure is useful, it is easy to get lost in the details. In this webcast, I use a 10K and a simple valuation spreadsheet to illustrate how to do a "quick read" of a 10K. |
|
| Betas and cost of capital: A test | Lecture note packet 1: 82-103 | |
| Bottom up beta: The approach The cost of debt Debt ratios Cost of capital First steps on cash flows |
||
| Post class test and solution | ||
Valuation of the week #4 |
Shake Shack: A blockbuster IPO but is it a good investment? |
Google Shared Spreadsheet |
| Cash flows: A test | Packet 1: 104-123 | |
Earnings and cash flows |
||
| 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 | |
| Valuation Tools Webcast #7 Capitalizing R&D expenses |
The process of converting R&D (and like expenses) from operating to capital expenses | |
| Growth rates I: A test | Packet 1: Page 122-152 | |
| Working capital investments From FCFF to FCFE Leverage and FCFE Growth rates - Historical growth rates - Analyst estimates of growth |
||
| Post class test and solution | ||
Valuation of the week #5 |
Apple: Time to Bail? |
Google Shared Spreadsheet |
| Review session for the first quiz | ||
| Take the first quiz and check out the solution as well as the distribution of grades for the class. | Packet 1: Pages 153-169 | |
| Fundamental growth rates - Growth in earnings per share - Growth in non-cash net income - Growth in operating income - Efficiency growth - Growth when margins are changing |
||
| 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. | |
| Terminal Value: A test | Packet 1: 170-193 | |
| Closing thoughts on growth Terminal value Choosing the right model |
||
| Post class test and solution | ||
Valuation of the Week #6 |
Valuing Bitcoin (NOT) - My post on Bitcoin - Bitcoin data (price, users, transactions etc.) |
Google Shared Spreadsheet |
| Loose Ends: A test | Packet 1: 192-211 | |
| Valuing Cash Dealing with cross holdings Other assets |
||
| 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 |
|
| DCF valuation: A test | Packet 1: 212-243 | |
| Complexity Debt & Legal Jeopardy Dealing with Employee Options Valuing companies - Stable growth DDM - Macro effects on valuation - Valuing the "market" |
||
| Post class test and solution | ||
| Valuation of the week #7 | Valuing CRH
CRH"s asset acquisition |
Google Shared Spreadsheet |
| DCF Valuation II: A test | Packet 1: 244-265 | |
| Valuing young, growth companies Valuing mature companies Valuing declining and distressed companies Valuing emerging market companies |
||
| Post class test and solution | ||
Weekly Challenge #5 |
Management Options and Equity Value | |
| 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 |
|
| Packet 1: 266-298 | ||
| Valuing mature companies in transition Valuing distressed companies Valuing emerging market companies Valuing financial service companies |
||
| Post class test and solution | ||
| Valuation of the week #8 | Valuing Lukoil |
Google Shared Spreadsheet |
15 (4/2/15) (Audio is low. I am sorry!)
|
Packet 1: 299-End
|
|
| Valuing pharmaceutical companies Valuing Cyclical & Commodity Companies Price versus Value Relative valuation - Description - Ingredients |
||
| Post class test and solution | ||
| Review session for the second quiz | ||
Weekly Challenge #6 |
Multiple: Definitional test | Weekly Challenge Solution |
16 (4/6/15) Quiz in first 35 minutes. Skip forward.
|
Take the second quiz and check out the solution as well as the distribution of grades for the class. | Packet 2: 12-27 |
| Analysis of multiples - PE ratio for a high growth firm - Determinants of PE ratios - Comparing PE across markets and time |
||
| Post class test and solution | ||
| Valuation of the Week #9 | Screening for bargains |
Google Shared Spreadsheet |
| Relative Valuation IIa: Test | Packet 2: 28-60 | |
- More on analyzing multiples |
||
| Post class test and solution | ||
Mystery Project (Due April 24 at 5 pm) |
The mystery project | Data for mystery project |
Weekly Challenge #7a |
Relative valuation | Weekly challenge 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 IIIa: Test | Packet 2: 61-93 | |
| Applying pricing rules Sector regressions: Unstable or young sectors Market regressions Picking the right multiple Relative versus Intrinsic value Sector versus Market value |
||
| Post class test and solution | ||
| Valuation of the week #10 | Pricing Lukoil |
Google Shared Spreadsheet |
| Private Company Valuation: A test | Packet 2: 93-128 | |
Closing thoughts on relative valuation |
||
| Post class test and solution | ||
| Weekly Challenge # 8 | Relative Valuation versus DCF 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. | |
| Private Company Valuation II: Test | Packet 2: 128-End | |
Valuing an initial public offering (IPO) |
||
| Post class test and solution | ||
Valuation of the week #11 |
Valuing an IPO: The Alibaba Offering (from last year) |
Google shared spreadsheet |
| Real Options: Introduction | Packet 3: 1-32 | |
| Options in investment analysis - Tests for making a "real options" argument - The option to delay - A patent as an option |
||
| Post class test and solution | ||
Weekly Challenge #9 |
The Value of Control | |
| Review session for the third quiz | ||
| 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. | ||
| Take the third quiz and check out the solution as well as the distribution of grades for the class. | Packet 3: 33-50 | |
| More on real options - The option to expand - The option to abandon - Financial flexibility as an option |
||
| Post class test and solution | ||
| Valuation of the week #12 | The Value of a CEO |
Google Shared Spreadsheet |
| Real Options II: Test | Packet 3: 57-84 | |
Valuing Financial Flexibility as an Option |
||
| Post class test and solution | ||
Weekly Challenge #10 |
Patent valuation | Weekly Challenge 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: 85-116 | |
Acquisition Valuation |
||
| Post class test and solution | ||
| Value Enhancement: Test | Packet 3: 123-144 | |
| Value enhancement - Price versus Value Enhancement - Ways of enhancing value - The expected value of control - Implications |
||
| Post class test and solution | ||
Review session for the final exam |
||
| Project summaries (for entire class) | ||
| Closing Presentation - Dante meets DCF (Ten tests of valuation) - Project findings |
||
Final Exam (5/13/15) |
Take the final exam & check the solution. |