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This 26-session equity valuation class will be taped starting September 9, 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 .
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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| Introduction to Class | ||
| 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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| Valuation bias: A test and my solutions | ||
The Bermuda Triangle of Valuation |
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| Post-class test and solution. | ||
Valuation of the week # 1 |
Tesla, the story stock |
Google Shared Spreadsheet |
| Cash flow consistency: A test (Congoleum) | ||
| DCF Big picture DCF inputs: The Discount Rate - Setting the table - Risk and the marginal investor - The riskfree rate |
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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 | ||
| The Equity Risk Premium - Historical Risk Premiums - Country risk premiums & measuring exposure |
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| Post-class test and solution. | ||
Valuation of the week # 2 |
Netflix, the Streaming Story |
Google Shared Spreadsheet |
| Implied Equity Risk Premiums: A test | Lecture note packet 1: 57-78 | |
| Implied Equity Risk Premiums - More on estimation - Interaction with other "risk" premiums First steps on betas |
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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 |
| Betas and cost of capital: A test | Lecture note packet 1: 79-99 | |
| Measuring Relative Risk (Betas & Alternatives) The cost of debt Debt ratios Cost of capital First steps on cash flows |
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| Post class test and solution | ||
Valuation of the week # 3 |
Apple, a Monte Carlo Simulation |
Google Shared Spreadsheet |
| Cash flows: A test | Lecture Notes 1: 100-128 | |
Earnings and cash flows |
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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 | |
Valuation of the week # 4 |
Deutsche Bank, A Greek Tragedy (in a German Setting) |
Google Shared Spreadsheet |
| Growth rates I: A test | Packet 1: Page 128-158 | |
| Reinvestment From FCFF to FCFE Leverage and FCFE Growth rates - Historical growth rates |
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| Post class test and solution | ||
| Review session for the first quiz | ||
| Valuation Tools Webcast #7 Capitalizing R&D expenses |
The process of converting R&D (and like expenses) from operating to capital expenses | |
9 (10/10/16) (First 30 minutes for quiz) |
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 159-174 |
| Analyst Estimates of growth 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 |
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| Post class test and solution | ||
Valuation of the week # 5 |
Twitter: A Company in need of adult supervision |
Google Shared Spreadsheet |
| 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 | Packet 1: 175-203 | |
Fundamental Growth |
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| Post class test and solution | ||
Valuation of the week # 6 |
Netflix: House of Cards or Streaming Powerhouse? |
Google Shared Spreadsheet |
| Loose Ends: A test | Packet 1: 204-227 | |
Choosing the Right DCF Model |
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| Post class test and solution | ||
| Weekly Challenge # 4 | Estimating fundamental growth |
Weekly challenge 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: 228-259 | |
| Complexity Debt & Legal Jeopardy Dealing with Employee Options& Restricted Stock Narrative and Numbers |
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| Post class test and solution | ||
Valuation of the week # 7 |
Henkel: Valuing in zero-interest rate environment |
Google Shared Spreadsheet |
| DCF Valuation Introduction: A test | Packet 1: 259-277 | |
| Narrative & Numbers: Changing your story Valuing a stable growth, dividend paying company Valuing the market |
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| 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 |
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| Packet 1: 278-303 | ||
| Valuing young companies & start-ups Valuing mature companies in transition |
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| Post class test and solution | ||
Valuing Distressed Companies |
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| Post class test and solution | ||
| Review session for the second quiz | ||
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 |
This is a group project that is due on November 21 at 5 pm. |
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| Price and Value: A Test | ||
Value and Price |
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| Post class test and solution | ||
17 (11/9/16) Quiz in first 35 minutes. Skip forward. |
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 2: 19-33 |
| Relative Valuation - Analyzing Multiples - PE Ratios |
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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. | |
| Relative Valuation IIa: Test | Packet 2: 34-73 | |
| Defining comparable firms Controlling for differences Pricing examples |
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| Post class test and solution | ||
Valeant: Picking at Scabs |
Google Shared Spreadsheet | |
| Relative Valuation IIIa: Test | Packet 2: 74-118 | |
More pricing examples |
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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 |
| Private Company Valuation:: Test | Packet 2: 119-154 | |
Sum of the Parts DCF valuation |
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| Post class test and solution | ||
| Review session for the third quiz | ||
| Private Company Valuation:: Test | ||
Valuing an initial public offering (IPO) Real Options |
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| Post class test and solution | ||
| Pricing/ Valuation of the week # 9 | Valuing/Pricing a Sports Franchise |
No Google Shared Spreadsheet. Value your favorite sports franchise |
22 (11/30/16) First 35 minutes for quiz
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Take the third quiz (a or b) and check out the solution (a or b) as well as the distribution of grades for the class. | Packet 3: 22-43 |
| 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. | ||
| Real Options II: Test | Packet 3: 44-83 | |
The Option to Abandon |
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| Post class test and solution | ||
| Pricing/ Valuation of the Week #10 | Pricing Assets |
No Google Shared Spreadsheet |
| Acquisition tests | ||
Acquisition Valuation |
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| Post class test and solution | ||
M&A Valuation (Inbev & SAB Miller) |
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| 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. | ||
| Value Enhancement: Test | Packet 3: 119-158 | |
| Value enhancement - Price versus Value Enhancement - Ways of enhancing value - The expected value of control - Implications |
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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 (12/16/16) |
Take the final exam & check the solution. |