Stock and equity valuation ppt
Stock Valuation Stock Features and Valuation Components of Required Return Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. Free Cash Flow Method Using the Free Cash Flow Method Once the value of the firm is estimated, an estimate of the stock price can be found as follows: MV of common stock (market capitalization) = MV of firm – MV of debt and preferred stock. Valuation Issues 1. How do you choose between firm and equity valuation (DCF valuation versus Earnings Growth) Done right, firm and equity valuation should yield the same values for the equity with consistent assumptions. Choosing between firm (DCF) and equity valuation (PE x EPS forecasts) boils down to the pragmatic issue of ease. Its target capital structure is 20% debt, 20% preferred stock, and 60% common equity. Its bonds have a 12% coupon, paid semiannually, a current maturity of 20 years, and a net price of $960. The firm could sell, at par, $100 preferred stock that pays a $10 annual dividend, but flotation costs of 5% would be incurred. The main purpose of equity valuation is to estimate a value for a firm or its security. A key assumption of any fundamental value technique is that the value of the security (in this case an equity or a stock) is driven by the fundamentals of the firm’s underlying business at the end of the day. This equity valuation method is used for a target business that has an identifiable stream of earnings or revenue which can be maintained by the business. For businesses that are still at the development stage then projected revenue or earnings are used as the basis of valuation models. Equity Valuation CHAPTER 13 13.1 VALUATION BY COMPARABLES Fundamental Stock Analysis: Models of Equity Valuation Basic Types of Models –Balance Sheet Models –Dividend Discount Models –Price/Earnings Ratios Estimating Growth Rates and Opportunities Models of Equity Valuation Valuation models use comparables
21 Feb 2013 Chapter 13 Equity Valuation.ppt - Free download as Powerpoint Presentation (. ppt), PDF File (.pdf), Text File (.txt) or view presentation slides
Fundamental Stock Analysis: Models of Equity Valuation. Copyright Stocks that have earnings and dividends that are expected to remain constant. Preferred Topic 9 (Ch. 18) Equity Valuation Models Intrinsic value versus market price Dividend discount models (DDM) The constant-growth DDM Stock prices and Presentation on theme: "Equity Valuation Models"— Presentation transcript: The return on a stock investment comprises cash dividends and capital gains or Chapter 7 Stock Valuation Copyright © 2012 Pearson Prentice Hall. All rights reserved. Learning Goals LG1 Differentiate between debt and equity. LG2 Discuss
28 Dec 2009 Appropriateness of model • DDM models are suitable for dividend paying stocks, where company has a discernible dividend policy that has
Chapter 7 Equity Markets and Stock Valuation Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. Value of Equity per share = $2.40 (1.02) / (.08 - .02) = $ 40.80! The stock was trading at $ 42 per share at the time of this valuation. We could argue that based upon this valuation, the stock is slightly over valued.! where, CF to Equityt = Expected Cashflow to Equity in period t ke = Cost of Equity Forms: The dividend discount model is a specialized case of equity valuation, and the value of a stock is the present value of expected future dividends. In the more general version, you can consider the cashflows left over after debt payments and reinvestment needs as the free cashflow to equity. The Basics Behind Stock Valuation. All businesses have an intrinsic value, and this value is based on the extent of free cash flow they have available during their lifetime. Money generated in the future is worth less than it is in present time, therefore projected free cash flows have to be discounted at a rate that is deemed appropriate.. Most Stock Valuation methods work on the theory that The valuation Valuation Modeling in Excel Valuation modeling in Excel may refer to several different types of analysis, including discounted cash flow (DCF), comparable trading multiples, precedent transactions, and ratios such as vertical and horizontal analysis. component is generally the most important piece of information for a company that is seeking to pursue an M&A transaction Mergers Acquisitions M&A Process This guide takes you through all the steps in the M&A process. Learn how Essentially, stock valuation is a method of determining the intrinsic value (or theoretical value) of a stock. The importance of valuing stocks evolves from the fact that the intrinsic value of a stock is not attached to its current price. By knowing a stock’s intrinsic value, an investor may determine whether
Free Cash Flow Method Using the Free Cash Flow Method Once the value of the firm is estimated, an estimate of the stock price can be found as follows: MV of common stock (market capitalization) = MV of firm – MV of debt and preferred stock.
where, CF to Equityt = Expected Cashflow to Equity in period t ke = Cost of Equity Forms: The dividend discount model is a specialized case of equity valuation, and the value of a stock is the present value of expected future dividends. In the more general version, you can consider the cashflows left over after debt payments and reinvestment needs as the free cashflow to equity. The Basics Behind Stock Valuation. All businesses have an intrinsic value, and this value is based on the extent of free cash flow they have available during their lifetime. Money generated in the future is worth less than it is in present time, therefore projected free cash flows have to be discounted at a rate that is deemed appropriate.. Most Stock Valuation methods work on the theory that The valuation Valuation Modeling in Excel Valuation modeling in Excel may refer to several different types of analysis, including discounted cash flow (DCF), comparable trading multiples, precedent transactions, and ratios such as vertical and horizontal analysis. component is generally the most important piece of information for a company that is seeking to pursue an M&A transaction Mergers Acquisitions M&A Process This guide takes you through all the steps in the M&A process. Learn how Essentially, stock valuation is a method of determining the intrinsic value (or theoretical value) of a stock. The importance of valuing stocks evolves from the fact that the intrinsic value of a stock is not attached to its current price. By knowing a stock’s intrinsic value, an investor may determine whether TSX.Using one of the valuation models we will discuss,you estimate the intrinsic stock value is $20 per share.After estimating this value,you look on the web and see that the stock is currently selling for $15.You would want to buy this stock.In contrast,if the current market price was $25 The art and science of equity valuation therefore enables the modern economic system to efficiently allocate scare capital resources amongst various market participants. Importance of Equity Valuation: Individual. As discussed, on a micro level, equity valuation is beneficial for the entire stock market ecosystem.
Chapter 7 Stock Valuation Copyright © 2012 Pearson Prentice Hall. All rights reserved. Learning Goals LG1 Differentiate between debt and equity. LG2 Discuss
21 Feb 2013 Chapter 13 Equity Valuation.ppt - Free download as Powerpoint Presentation (. ppt), PDF File (.pdf), Text File (.txt) or view presentation slides Fundamental Stock Analysis: Models of Equity Valuation. Copyright Stocks that have earnings and dividends that are expected to remain constant. Preferred
The main purpose of equity valuation is to estimate a value for a firm or its security. A key assumption of any fundamental value technique is that the value of the security (in this case an equity or a stock) is driven by the fundamentals of the firm’s underlying business at the end of the day. This equity valuation method is used for a target business that has an identifiable stream of earnings or revenue which can be maintained by the business. For businesses that are still at the development stage then projected revenue or earnings are used as the basis of valuation models. Equity Valuation CHAPTER 13 13.1 VALUATION BY COMPARABLES Fundamental Stock Analysis: Models of Equity Valuation Basic Types of Models –Balance Sheet Models –Dividend Discount Models –Price/Earnings Ratios Estimating Growth Rates and Opportunities Models of Equity Valuation Valuation models use comparables Chapter 7 Equity Markets and Stock Valuation Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If you continue browsing the site, you agree to the use of cookies on this website. Value of Equity per share = $2.40 (1.02) / (.08 - .02) = $ 40.80! The stock was trading at $ 42 per share at the time of this valuation. We could argue that based upon this valuation, the stock is slightly over valued.!