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This 26-session equity valuation class will be starting February 4, 2019, 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
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| Post-class test and solution. | ||
Valuation of the week # 1 |
Google Shared Spreadsheet | |
2 (2/6/19)
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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 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 (2/11/19)
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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 |
Google Shared Spreadsheet | |
4 (2/13/19)
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Risk Free Rates: 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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| 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. | ||
Valuation of the week #3 |
Google Shared Spreadsheet | |
5 (2/20/19)
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Risk Premiums: A test | Lecture note packet 1: 51-74 |
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 #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 |
6 (2/25/19)
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ERP: An Informal Test | Lecture note packet 1: 74-97 |
| Measuring Relative Risk (Betas & Alternatives) The cost of debt |
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| Post class test and solution | ||
Valuation of the week #4 |
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Google Shared Spreadsheet |
7 (2/27/19)
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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 | |
8 (3/4/19)
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Cash Flows II: A test | Packet 1: Page 125-161 |
Accounting Fraud & Negative Earnings |
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| Post class test and solution | ||
Valuation of the week #5 |
Google Shared Spreadsheet | |
9 (3/6/19)
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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 162-169 |
| Historical Growth Rates Analyst Estimates of growth |
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| Valuation Tools Webcast #7 Capitalizing R&D expenses |
The process of converting R&D (and like expenses) from operating to capital expenses | |
10 (3/11/19)
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Start of the class test | Packet 1: Pages 170-205 |
Fundamental growth rates - Efficiency growth - Growth when margins are changing Terminal Value: Constraining Rules |
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| Post class test and solution | ||
11 (3/13/19)
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Start of the class test | Packet 1: Pages 206-233 |
Picking a DCF Model |
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| Post class test and solution | ||
Weekly Challenge #4a |
Terminal Value | 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. | |
| 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 |
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12(3/25/19)
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More Loose Ends: A Test | Packet 1: 234-258 |
Debt & Legal Jeopardy |
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| Post class test and solution | ||
Valuation of the week #6 |
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Google Shared Spreadsheet |
13 (3/27/19)
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Story Telling and Number Crunching | Packet 1: 259-276 |
| Changing your story Valuing a stable growth, dividend paying company Value and Macro Changes |
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| Post class test and solution | ||
Weekly Challenge #5 |
Management Options and Equity Value | |
| Review session for the second quiz | ||
14 (4/1/19)
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Packet 1: 277-300 | |
| Valuing young companies & start-ups Valuing mature companies in transition Valuing declining & distressed companies |
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| Post class test and solution | ||
Valuation of the week #8 |
Valuing a Sports Franchise (from 2014) |
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15 (4/3/19)
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Packet 1: 301-330 | |
| Valuing young companies & start-ups Valuing mature companies in transition Valuing declining & distressed 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 (4/8/19) (Quiz in first half of class)
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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: 330-End |
| Valuing Companies with Intangible Assets Valuing Commodity Companies Value versus Price |
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Valuation of the week #9 |
Valuing an IPO (Levi Strauss) |
Google Shared Spreadsheet |
17 (4/10/19)
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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 |
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. | |
18 (4/15/19)
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Relative Valuation IIa: Test | Packet 2: 34-77 |
| Defining comparable firms Controlling for differences Pricing examples |
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| Post class test and solution | ||
Valuation of the week #10 |
Valuing and Pricing Uber |
Google Shared Spreadsheet |
19 (4/17/19)
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Relative Valuation IIIa: Test | Packet 2: 78-120 |
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 |
20 (4/22/19) (Fire alarm in middle; lost 10 minutes)
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Private Company Valuation | Packet 2: 121-163 |
Valuing Private Businesses |
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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 |
21 (4/24/19)
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Real Options Test | |
| The Essence of Real Options Tests for Real Options The Option to Delay |
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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. | ||
22 (4/29/19)
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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: 37-57 |
| Real Options The Option to Delay - The Option to Expand - The Option to Abandon |
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| Post class test and solution | ||
23 (5/1/19)
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Real Options Test II | Packet 3: 58-89 |
The value of financial flexibility |
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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. | ||
24 (5/6/19)
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Acquisition tests (over the entire class) | |
Acquisition Valuation |
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| Post class test and solution | ||
Review session for the final exam |
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25 (5/8/19)
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Value Enhancement: Test | Packet 3: 131-End |
| 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 | ||
26 (5/13/19)
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Project summaries (for entire class) | |
Closing Presentation |
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Final Exam (5/20/19) |
Take the final exam & check the solution. |