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Equity Valuation:: Applications and Processes
Equity Valuation:: Applications and Processes
Presenter
Venue
Date
VALUATION
Estimating
Proceeds
from
Immediate
Liquidation
Examining
Values of
Comparable
Assets
Value
Estimate
Estimating
Variables
Related to
Future
Returns
INTRINSIC VALUE
ASSET MISPRICING
Broad
Target
Market
Narrow
Target
Market
Differentiation
Potential Interpretation
VALUATION MODELS
Sum-of-the-Parts Valuation
Sensitivity Analysis
Situational Adjustments
ANALYST ROLES
Sell-Side
Analysts
Buy-Side
Analysts
Corporate
Analysts
Independent
Analysts
ANALYST RESPONSIBILITIES
The CFA Institute Code of Ethics:
Members of CFA Institute must use reasonable care
and exercise independent professional judgment when
conducting investment analysis, making investment
recommendations, taking investment actions, and
engaging in other professional activities.
RESEARCH REPORTS
Effective research reports include the following:
Timely information
Clear, incisive language
Objective and well-researched information
Clearly distinguished facts and opinions
Consistent analysis, forecasts, valuation, and
recommendations
Sufficient disclosure of information
Key risk factors
Disclosures of conflicts of interest
SUMMARY
Valuation
Intrinsic value: Value given a complete understanding of the asset
Typically assumes the firm is a going concern
Intrinsic value Market price
Asset Mispricing
Active investors seek to exploit market mispricing
Active investors must believe that the market will correct itself within
the investment horizon
SUMMARY
Valuation Process
Steps: Industry and competitive analysis, forecasting, model
selection, valuation, recommendations
Industry analysis: Rivalry, new entrants, substitutes, supplier
power, buyer power
Quality of earnings is crucial
Valuation Models
Absolute models: Present value and asset-based models
Relative valuation models: Price ratios and enterprise value
multiples
Model should contain sensitivity analysis and situational
adjustments
SUMMARY
Analyst Roles