Stock Valuation

Company comparable transactions that company sold for

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Unformatted text preview: going to pay more, growth supports valuation Comparable publicly traded companies: p/e (price/earnings) akin to the inverse of a cap rate for real estate you have to adjust p/e for growth so move into PEG peg p/revenue does not factor in cost or payout ratio not clear what relationship between free cash flow and something else is p/EBITDA EBITDA allows you to measure the service of your debt (interest you can pay out of pre- tax, so allows you to see if you can pay off your debt) So ratio is a measure of “enterprise value of the company” a combination of debt and equity of a company Comparable transactions: “that company sold for 6 times revenue, therefore we should sell for 6 times revenue” Problems: when a company is purchased, it is probably one of the better companies in the industry, the other companies are left to flounder. Many of these are typically used in “fairness opinions” rendered by investment banks Start with discounted cash flows and then look at comparables, and based on all these measures, this appears to be a fair deal/not a fair deal Buffett’s “intrinsic value”: doesn’t looka t p/e or anything. Looks at intrinsic value (modified book value: firm reputation, grand value, durability, book value, and ascribes premium to book value based on these) Brings in intangible assets Technical analysis: Stock chart: time on X, Price on Y, and then lines down from hi to lo for the day with a line in the middle for at what it closed. Merely looking a...
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