Firman v_aluaatio Flashcards
Can you name the 4 valuation approaches?
- Present value
- Relative valuation (= price multiples)
- The asset based approach
- Contingent claim valuation
Mitä Present value -valuation approach sisältää esimerkiksi?
ei tarvii varmaan muistaa ulkoo
- Enterprise value (EV)
- Equity value
- Discounted cash flow (to firm) model
- Discounted cash flow (to equity) model
- Economic value added model
- Residual income model
- Adjusted present value model
- Dividend discount model
Mitä Relative valuation (multiples) -valuation approach sisältää esimerkiksi?
(ei tarvii varmaan muistaa ulkoo)
- Enterprise value (EV)
- Equity value
- EV/IC
- EV/NOPAT
- P/B
- P/E
- EV/EBIT
- EV/EBITDA
- EV/revenue
Mitä The asset based approach -valuation approach sisältää esimerkiksi?
(ei tarvii varmaan muistaa ulkoo)
- Net asset value (NAV) approach
- Sum-of-the-parts approach
- Liquidation approach
What are the steps of valuation process?
- Business analysis
- Financial statement analysis
- Forecasting
- Valuation
Forecasting in the valuation process.
We make assumptions of the future: future cash flows, sales, balance sheet items.
So, future financial statements are projected.
What are the different methods used in Forecast assumptions?
Methods of predicting financial information can be classified as follows:
MECHANICAL:
1) Statistical models (UNIVARIATE) 2) Statistical models (MULTIVARIATE)
NON-MECHANICAL:
3) Trend analysis (UNIVARIATE) 4) Security analyst approach (MULTIVARIATE)
Different methods are based on different forecasting tools and data sources.
How do you select from the different methods used in Forecast assumptions?
Data availability and the purpose for which the predictions are made affect the selection of different prediction methods.
Mechanical prediction methods
Mechanical prediction methods include:
1) Univariate statistical models that are based on the analysis of the time-series of a single financial variable
2) Multivariate statistical models that are based on the analysis of the time-series of multiple financial variables
How are Mechanical prediction methods used?
In mechanical methods, predictions of the financial variable are mechanically driven from the data by applying a specified statistical model:
- Statistical model is applied to the past data to estimate the model parameters
- The estimated paremeters are then applied to current data to predict the future value of the variable
Example of a mechanical univariate statistical model is a model that forecasts earnings!
Example of a mechanical univariate statistical model is a model that forecasts earnings (X) to be an equally weighted average of the past four year’s earnings.
This approach assumes that future earnings can be simply predicted from the time-series of past earnings.
Ei oo mitenkään erityisen hyvä metodi. Toimii enemmän yleisluontoisena mallina toimialan tarkasteluun, eikä company specific.
Tell me about Non-mechanical prediction methods?
In non-mechanical prediction approach, an analyst incorporates a judgemental factor of her own into the analysis
This factor may reflect an ever-changing mix of economic inputs
A typical example of univariate non-mechanical approach is ’free-hand’ extrapolation of a time-series plot of earnings referred to as a trend analysis
Analysts’ earnings forecasts are a typical example of a multivariate non-mechanical prediction method
-> Analysts use many quantitative and qualitative information sources including financial reports of the firm, macro-economic forecasts, company visits etc.
Can you tell me about Analysts’ earnings forecasts?
Analysts’ earnings forecasts are frequently used to assess the future performance of the firm
Consensus earnings forecasts refer to the means or medians of the analysts’ earnings forecasts
-> Consensus earnings forecasts are probably the most important piece of financial information, at least for the valuation purposes
Range of the earnings forecasts of individual analysts measure the uncertainty in the analysts’ opinions regarding the value of the upcoming earnings
Companies Routinely Steer Analysts to Deliver Earnings Surprises
With nudges and phone calls, analysts are urged to lower their estimates, making it easier for companies to beat them; ‘a rigged race,’” says Barry Diller.
An analysis by The Wall Street Journal found that earnings estimates often decline steadily after the end of a quarter. That can turn what might have been an embarrassing “miss” for the company into a positive surprise.
Accuracy of analysts’ earnings forecasts and time before the earnings announcement?
Earnings announcement date affects the Accurace of analysts’ earnings forecasts:
Mitä kauempana ollaan siitä julkaisupäivästä, sitä huonompia kaikkien arviot.
Mutta mitä lähemmäksi sitä tulevaa julkaisupäivää mennään, sitä pienempi hajonta eri analyytikoiden arvauksille tulee ja sitä lähempänä ne on totuutta!
We derive abnormal earnings model from what model?
Deriving abnormal earnings model is done from the dividend discount model.
What is same in the abnormal earnings model as in the DDM and DCF models…
Principle in the abnormal earnings model is the same as in the DDM and DCF models…