Valuation Online Class

This is a course of 25 short webcasts (about 12-20 minutes apiece), designed both to capture what I do in my regular semester-long valuation class and to supplement my books on valuation. With each session, you can download slides for that session and a post-class test to go with it (and solutions). If you have my book, the relevant sections of the book are highlighted. The first part are the webcast related to the class and the second part are tools webcasts, designed to help you apply the concepts to real companies. The class webcasts are on YouTube and you will need to be online, to watch them. The in-practice webcasts are downloadable to your computer or device and can be watched at your convenience. I have also created a version of this class on iTunes U, and you can get to that class by clicking here.

Class Webcasts

	Session Webcast	Short Description	Supplementary Material	Inv Valuation (3rd Edition)
1	Introduction to valuation	Lays out the rationale for doing valuation as well as the issues of bias, complexity and uncertainty that bedevil it.	1. Slides 2. Post-class test & solution	Preface, Chapter 1
2	Intrinsic Value- Foundations	Sets up the foundations of intrinsic valuation, with a contrast between valuing a business and valuing the equity in that business.	1. Slides 2. Post-class test & solution	Chapter 2
3	The Risk Free Rate	Sets up the requirements for a rate to be risk free and the estimation challenges in estimating that rate in different currencies.	1. Slides 2. Post-class test & solution	Chapter 7
4	The Equity Risk Premium	Contrasts different approaches for estimating equity risk premiums in mature markets and extends these approaches to emerging markets and then to individual companies.	1. Slides 2. Post-class test & solution	Chapter 7
5	Betas - Relative Risk Measures	Describes what a beta tries to measure and after critiquing the standard regression approach to beta estimation, I develop an approach for estimating betas for individual companies.	1. Slides 2. Post-class test & solution	Chapter 8
6	Costs of Debt & Capital	Defines debt and cost of debt and then uses those measures to arrive at the cost of capital for a company.	1. Slides 2. Post-class test & solution	Chapter 8
7	Estimating Cash Flows	Goes through the steps in estimating cash flows, from measuring earnings to computing reinvestment and then on to cash flows (to both the firm and to equity).	1. Slides 2. Post-class test & solution	Chapter 9,10
8	Estimating Growth	Looks at alternative approaches to estimating expected growth, including past growth and analyst estimates, as well as fundamental growth.	1. Slides 2. Post-class test & solution	Chapter 11
9	Terminal Value	It is the biggest number in any discounted cash flow valuation, and we look at simple rules that keep it in check.	1. Slides 2. Post-class test & solution	Chapter 12
10	Value Enhancement	Looks at the drivers of value and how management actions can alter the value of a firm, for better or worse.	1. Slides 2. Post-class test & solution	Chapter 31
11	Loose Ends in Valuation	To get from operating asset value to equity value, we have to deal with cash, cross holdings and other assets first, then net out debt.	1. Slides 2. Post-class test & solution	Chapter 16
12	Acquisition Ornaments: Synergy, Control & Complexity	Look at the value of control and synergy, oft used reasons for acquisitions, as well as the consequences of complexity for value.	1. Slides 2. Post-class test & solution	Chapter 25
13	Loose Ends in Valuation: Distress, Dilution & Illiquidity	Look at how best to incorporate the effects of distress, dilution and ill liquidity into the value per share for a company	1. Slides 2. Post-class test & solution	Chapter 22, 23
14	Relative Valuation - First Principles	Develop a four-step process for deconstructing, understanding and using multiples.	1. Slides 2. Post-class test & solution	Chapter 17
15	PE Ratios	Look at the determinants of PE ratios and how to use them in comparisons across time, markets and companies.	1. Slides 2. Post-class test & solution	Chapter 18
16	Other Earnings Multiples	Extend the discussion to look at operating earnings and EBITDA multiples and their determinants.	1. Slides 2. Post-class test & solution	Chapter 18
17	Book Value Multiples	Look at the variables that cause book value multiples (price to book and EV to Investment Capital) to vary across companies and time.	1. Slides 2. Post-class test & solution	Chapter 19
18	Revenue Multiples	Examine why companies trade at different multiples of revenues in different businesses and the determinants of these values.	1. Slides 2. Post-class test & solution	Chapter 20
19	Asset Based Valuation	Look at valuation approaches (accounting book value, sum of the parts) that value the assets of a business and aggregate up to value.	1. Slides 2. Post-class test & solution
20	Private Company Valuation	Examine the estimation challenges associated with valuing small or large privately-owned businesses.	1. Slides 2. Post-class test & solution	Chapter 24
21	The Essence of Real Options	Lay the foundations for viewing and valuing some assets as options and how it adds to their values	1. Slides 2. Post-class test & solution	Chapter 28
22	The Option to Delay (Valuing Patents & Undeveloped Reserves)	Use option pricing technology to value unexercised options and undeveloped natural resource reserves.	1. Slides 2. Post-class test & solution	Chapter 28
23	The Option to Expand & Abandon	Look at how the option to expand into new markets/products can add value to young growth companies and the option to abandon investment can create value for flexible companies.	1. Slides 2. Post-class test & solution	Chapter 29
24	Distressed Equity as an Option	Examine how equity in troubled firms with large debt burdens can behave like options, with implications for investing and corporate finance.	1. Slides 2. Post-class test & solution	Chapter 30
25	Closing Thoughts	Wrapping up valuation, with closing thoughts.	1. Slides 2. Post-class test & solution	Chapter 34

Valuation Tools

While it is nice to talk about the big picture of valuation , and I do, in my classes, it is the nuts and bolts issues that trip us up. In this section, I will be posting webcasts that can help you navigate some of these nuts and bolts questions.

Topic	Description	Webcast	Supporting material
Getting data	Before you can do valuations and process information, you have to first collect the information. In this webcast, I look at ways to get information on a company's filings, macro economic indicators and sector-wide data.	Webcast	SEC website SEC Live FRED (Federal Reserve)
From financial disclosures to value	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.	Webcast	Presentation P&G: 10K P&G: Valuation (Excel spreadsheet)
Creating a trailing 12-month financial statement	When valuing a business, you want the most updated information you can find. But what if your most recent annual report or 10K is several months old? The solution is to create a trailing 12-month financial statement.	Webcast	Apple: 10K Apple: 10Q Apple Trailing 12-month (spreadsheet)
Estimating an implied equity risk premium	I have been a strong proponent of implied equity risk premiums, forward looking estimates that are extracted by looking at stock prices today and expected cash flows in the future. While I have an implied equity risk premium spreadsheet on my website, I try to get some of the mystery out of both the process and the inputs in this webcast.	Webcast	Presentation Spreadsheet S&P 500 on buybacks S&P 500 earnings
Leases and Debt	Accounting standards allow companies to classify some leases as operating leases, primarily based upon the degree of ownership vested in the lessee. Operating lease expenses are treated as operating expenses, not financial expenses. The sensible thing to do is to convert lease commitments to debt. In the process, though, you have to redo your financial statements.	Webcast	Disney Annual Report Converting leases to debt (spreadsheet)
Capitalizing R&D	R&D is the ultimate cap ex, if you define capital expenditures as investments designed to create benefits over many years. Accountants incorrectly treat R&D as operating expenses. The logical fix is to convert R&D from an operating to capital expenses, though this will also lead to a restatement of both the income statement and the balance sheet.	Webcast	Microsoft: 10K for 2012 Microsoft: 10K for 2011 Converting R&D to capital (spreadsheet)
ROIC and ROE: The "only" valuation numbers that matters	The return on invested capital is more than an accounting number. If computed right, it measures what a firm is generating as a return on its existing projects and provides a key indicator (though not always a definitive one) of what it will generate on future investments. That, in turn, will determine how much value growth will add (or destroy) in the company. If you don't know this number for a company, your valuation has no moorings.	Webcast	Walmart 10K (2013) Walmart 10K (2012) Spreadsheet
Terminal Value Check	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)	Webcast	Sample DCF valuation Terminal value analyzer
Employee Options	When a company uses options to compensate employees or to pay suppliers, it saves itself cash that it would have used otherwise but it does "dilute" the value of the equity held by common stockholders. When valuing a company with a significant option overhang, the right thing to do is to value the options as options and subtract that value from the estimated value of equity, before dividing by the number of shares outstanding.	Webcast	Cisco 10K Option spreadsheet
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.	Webcast	Blog post on topic Presentation Excel spreadsheet
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.	Webcast	Presentation Bank raw data Descriptive Statistics
Valuing Patents as Options	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.	Webcast	Presentation Spreadsheet
Valuing Distressed Equity as an Option	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.	Webcast	Jet India Financials Jet DCF valuation Jet Option valuation