Appraisal Economics’ Post

Relative Valuation 🆚 Intrinsic Valuation While both methods have their place, understanding when to use each approach is crucial for making informed investment decisions. Let's break it down: 🔹 𝗥𝗲𝗹𝗮𝘁𝗶𝘃𝗲 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 Values a company by comparing it to similar companies (peers) based on key multiples such as P/E, EV/EBITDA, or P/S. It’s like benchmarking—seeing how your target stacks up against its competitors. 📌 When to Use: • Ideal when market sentiment and external factors strongly influence valuations.    • Helpful for understanding how a company is priced relative to its peers in the same sector.    • Great for fast-paced environments like public equity markets. ⚠️ Watch Out It can overlook company-specific fundamentals and lead to overvaluation in market bubbles. 🔹 𝗜𝗻𝘁𝗿𝗶𝗻𝘀𝗶𝗰 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 Focusing on its internal fundamentals rather than external market comparisons. Often seen through Discounted Cash Flow (DCF), this method estimates the company's intrinsic value based on future cash flows, discounting them to present value. 📌 When to Use: • Perfect for investors who believe in the company's core fundamentals and growth potential.    • Most effective when cash flows are predictable and relatively stable.    • Strategic Planning: Useful for in-depth investment decisions and acquisitions. ⚠️ Watch Out Sensitive to assumptions on growth rates and discount rates, which can introduce uncertainty if projections are inaccurate. 💡 So, Which One ❔ The choice depends on context: 1. In volatile markets, relative valuation may give better insights. 2. For long-term fundamental analysis, intrinsic valuation shines. Ultimately, wise investors often use both to cross-check their results. 📈✅ How do you approach valuation in your analyses? Share your thoughts below! 👇 📍 Want to practice business valuation? Take the Tutorial + Excel Tools (𝟱𝟬% 𝗼𝗳𝗳 𝗳𝗼𝗿 𝗮 𝗹𝗶𝗺𝗶𝘁𝗲𝗱 𝘁𝗶𝗺𝗲) https://lnkd.in/dmVizV9W or download free resources at BojanFin. com #finance #valuation #financialmodeling #investing #intrinsicvalue #relativevaluation #corporatefinance

Do not trust EBIT, EBITA, or EBITDA, even though it's talked about 400 times in this valuation book. https://lnkd.in/gbG5wqFG #FinancialInsights #BusinessStrategy #InvestmentTips #HolisticAnalysis #BusinessValuation

📊 Diving into the intricacies of Market to Book Ratio Valuation is akin to wielding a financial compass in the vast landscape of investment appraisal, wouldn't you agree? 💼🧭 It's like navigating the seas of stock valuation, where Market to Book Ratio stands as the epitome of professionalism in assessing the relationship between a company's market value and its book value, don't you think? 🌊💰 Market to Book Ratio, much like a financial beacon, sheds light on how investors perceive the worth of a company relative to its accounting value, isn't it? 🔦📊 But, do you grasp the intricacies of interpreting high or low ratios, understanding industry benchmarks, and the factors influencing investor sentiment towards a company's intrinsic worth? 🤷♂️💡 Follow SkillFine if you are a #finance professional  -> Repost this if you find it useful -> We help individuals get certified in #business and finance skills

🔍 𝑫𝒊𝒔𝒄𝒐𝒖𝒏𝒕𝒆𝒅 𝑪𝒂𝒔𝒉 𝑭𝒍𝒐𝒘 (𝑫𝑪𝑭) 𝑴𝒆𝒕𝒉𝒐𝒅 Curious about how to determine if a company's stock is overvalued or undervalued? 🤔 If so, take just 10 minutes to dive into my latest article and gain the insights you need! 🕒 I've just published a comprehensive article on the DCF Method on my website. If you've ever wanted to delve deep into the mechanics of valuation and understand how to determine the intrinsic value of an investment, this guide is for you. 👉 Read the full article here: https://lnkd.in/dNwM25X3 In this detailed guide, you'll discover: 📊𝐖𝐡𝐚𝐭 𝐢𝐬 𝐭𝐡𝐞 𝐃𝐂𝐅 𝐌𝐞𝐭𝐡𝐨𝐝? Understand the fundamentals and why it's a cornerstone in investment analysis. 🛠 𝐒𝐭𝐞𝐩-𝐛𝐲-𝐒𝐭𝐞𝐩 𝐃𝐂𝐅 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬: Learn how to forecast free cash flows, determine the discount rate, calculate terminal value, and sum it all up to find intrinsic value. 📈 𝐏𝐫𝐚𝐜𝐭𝐢𝐜𝐚𝐥 𝐄𝐱𝐚𝐦𝐩𝐥𝐞𝐬:  Walk through real-world scenarios that illustrate how to apply the DCF method effectively. ✅ 𝐀𝐝𝐯𝐚𝐧𝐭𝐚𝐠𝐞𝐬 & 𝐋𝐢𝐦𝐢𝐭𝐚𝐭𝐢𝐨𝐧𝐬:  Get insights into the strengths of the DCF method and be aware of its potential pitfalls. 🚩 𝐂𝐨𝐦𝐦𝐨𝐧 𝐌𝐢𝐬𝐭𝐚𝐤𝐞𝐬 𝐭𝐨 𝐀𝐯𝐨𝐢𝐝:  Enhance your analysis by learning about common errors and how to steer clear of them. Whether you're a seasoned financial professional or just starting your journey in finance, this article will enhance your understanding of valuation techniques. Feel free to share your thoughts or ask questions—I’d love to hear your feedbacks! #Finance #DCFMethod #Valuation #InvestmentAnalysis #FinancialModeling

𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐑𝐚𝐭𝐢𝐨 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 Ratio analysis is a method of examining a company's balance sheet and income statement to learn about its liquidity, operational efficiency, and profitability. It is a way of analyzing a variety of financial data about a company. Ratio analysis is a cornerstone of fundamental equity analysis. There are various ratios that investors and business experts can analyze to make predictions about a company's financial stability and potential future growth. These can be used to evaluate either how a company's performance has changed over time or how it compares to other organizations in the same industry. Few of the important ratios used in the industry are categorized as follows: • Profitability Ratios • Leverage Ratios • Efficiency Ratios • Liquidity Ratios • Valuation Ratios ⚠️𝘛𝘩𝘪𝘴 𝘱𝘰𝘴𝘵 𝘩𝘢𝘴 𝘣𝘦𝘦𝘯 𝘤𝘳𝘦𝘢𝘵𝘦𝘥 𝘢𝘴 𝘢 𝘱𝘢𝘳𝘵 𝘰𝘧 𝘢𝘤𝘢𝘥𝘦𝘮𝘪𝘤 𝘳𝘦𝘴𝘦𝘢𝘳𝘤𝘩 Thank you Equivaluesearch team! #equityresearch #finance #financialanalyst

It doesn’t matter if the valuation book mentioned it over 400 times. Don’t trust EBIT, EBITA, or EBITDA. https://lnkd.in/gbG5wqFG #FinancialInsights #BusinessStrategy #InvestmentTips #HolisticAnalysis #BusinessValuation

Hello, Throughout this course, I delved into essential concepts such as: Investment Types: Understanding the various avenues for putting capital to work. Present, Future, and Terminal Values: Grasping the time value of money and its implications. Opportunity Cost: Evaluating the trade-offs in investment decisions. Calculating DCF: Mastering Discounted Cash Flow analysis. Calculating NPV: Learning how to assess the profitability of investments. Calculating IRR: Understanding Internal Rate of Return for effective project evaluation. Calculating the Payback Period: Analyzing how quickly investments can be recouped. I’m excited to apply these skills in real-world scenarios and enhance my financial acumen!  Just finished the course “Investment Evaluation” by Yash Patel! Check it out: https://lnkd.in/dBt9rxZS #investments.

Aswath Damadoran is the Dean of Valuation. He has taught millions of people how to value a company. Today I am sharing his valuation class (worth thousands of $) for free 5 Rules on which Aswath Damodaran has built his success: 1️⃣ Principle of Intrinsic Valuation Damodaran emphasizes the importance of intrinsic valuation, which involves estimating the fundamental value of an asset based on its expected future cash flows. He often advocates for using discounted cash flow (DCF) analysis to determine the present value of future cash flows. 2️⃣ Risk and Discount Rates Damodaran stresses the significance of understanding and incorporating risk into the valuation process. He suggests using appropriate discount rates that reflect the risk associated with an investment. This may involve considering factors such as the company's beta, cost of equity, and risk-free rate. 3️⃣ Narrative and Numbers Damodaran emphasizes the need to combine both qualitative and quantitative analysis. While financial numbers are crucial, understanding the narrative or story behind those numbers is equally important. Investors should consider both aspects to make informed investment decisions. 4️⃣ Market Efficiency and Behavioral Finance Damodaran recognizes the efficiency of markets but also acknowledges that markets can be irrational in the short term. He incorporates insights from behavioral finance into his analysis, recognizing that investor behavior may deviate from rational expectations. 5️⃣ Margin of Safety While this principle is not unique to Damodaran, he does emphasize the importance of incorporating a margin of safety in valuation. Investors should build a margin of safety into their estimates to account for uncertainties and unexpected events. 📚 Did you like this? Grab a PDF with 50 Finance visuals like this one here: https://lnkd.in/epJNgDvz

𝐑𝐄𝐋𝐀𝐓𝐈𝐕𝐄 𝐕𝐀𝐋𝐔𝐀𝐓𝐈𝐎𝐍 𝐌𝐎𝐃𝐄𝐋 𝐎𝐅 𝐂𝐈𝐏𝐋𝐀 𝐋𝐓𝐃 𝑾𝒉𝒂𝒕 𝑰𝒔 𝒂 𝑹𝒆𝒍𝒂𝒕𝒊𝒗𝒆 𝑽𝒂𝒍𝒖𝒂𝒕𝒊𝒐𝒏 𝑴𝒐𝒅𝒆𝒍? A relative valuation model is a business valuation method that compares a company's value to that of its competitors or industry peers to assess the firm's financial worth. This approach assumes that the value of an asset can be estimated by looking at how similar assets are priced. Relative valuation models are commonly used in equity valuation, where analysts compare the valuation multiples of a target company to those of its peers to assess its attractiveness as an investment opportunity. 𝐈 𝐚𝐦 𝐞𝐱𝐜𝐢𝐭𝐞𝐝 𝐭𝐨 𝐬𝐡𝐚𝐫𝐞 𝐭𝐡𝐚𝐭 𝐈 𝐡𝐚𝐯𝐞 𝐫𝐞𝐜𝐞𝐧𝐭𝐥𝐲 𝐩𝐫𝐞𝐩𝐚𝐫𝐞𝐝𝐚 𝐫𝐞𝐥𝐚𝐭𝐢𝐯𝐞 𝐯𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐦𝐨𝐝𝐞𝐥 𝐟𝐨𝐫 𝐂𝐢𝐩𝐥𝐚 𝐋𝐭𝐝.   Special thanks to The Valuation School and Parth Verma, sir, for their guidance and mentorship. Disclaimer: This model is prepared solely for academic learning purposes.