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L1 51 Equity Valuation: Concepts and Basic Tools > k explain advantages and disadvantages of each category of valuation model. > Flashcards

k explain advantages and disadvantages of each category of valuation model. Flashcards

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L1 51 Equity Valuation: Concepts and Basic Tools (11 decks)

A: Evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued or undervalued by the market

B: Describe major categories of equity valuation models

C Explain the rationale for using present‐value of cash flow models to value equity and describe the dividend discount and free‐cash‐flow‐to‐equity models

d: Calculate the intrinsic value of a non-callable, non-convertible preferred stock.

e: Calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate.

f identify companies for which the constant growth or a multistage dividend discount model is appropriate;

g explain the rationale for using price multiples to value equity and distinguish between multiples based on comparables versus multiples based on fundamentals;

h calculate and interpret the following multiples: price to earnings, price to an estimate of operating cash flow, price to sales, and price to book value;

i describe enterprise value multiples and their use in estimating equity value;

j describe asset-based valuation models and their use in estimating equity value;

k explain advantages and disadvantages of each category of valuation model.

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