University School of Business

Bachelor of Business
Administration
Security Analysis and Portfolio Management
23BAT-241
Mr. Virender Thakur

Valuation of securities DISCOVER . LEARN .

EMPOWER
Valuation Of Securities
Course Objective

To develop understanding of different concepts

relating to analysis of investment and portfolio
management
Course Outcome
CO1
To understand different avenues of investment and to equip the knowledge of security
analysis.

CO2
To illustrate the concepts and theories of portfolio management for better investment. Source: https://www.digitalstudycenter.com/2015/05/security-valuati
on.html
CO3
To compare the investment alternatives and portfolio management theories.

CO4
To summarize the decisions for investment and comparison of portfolios for their results with
the predefined objectives

CO5
To adapt a model for portfolios using traditional concept or by using modern concept to get
more returns.

2
 Equity Valuation
Valuation of shares is the process of knowing the value of a
company’s shares. Share valuation is done based on quantitative
techniques and share value will vary depending on the market
demand and supply. Equity Valuation becomes easy when the script
is listed, Company is active in business & shares are regularly
trading. Since market price is ready available in stock exchange
website. Further we can average out the daily closing market price of
last one year to make it full proof, however it becomes challenge to
value unlisted companies equity shares or Companies whose shares
are not regularly trade.
 When is Valuation of shares required
1.One of the important reason is when you are
about to sell your business and you wanted to
know your business value
2.When you approach your bank for a loan based
on shares as a security
3.Merger, acquisition, reconstruction,
amalgamation etc – valuation of shares is very
important
4. When your company shares are to be
converted i.e. from preference to equity
 Continue…..
6. For tax assessments under the wealth tax or
gift tax acts
7. In case of litigation, where share valuation is
legally required
9. Compensating the shareholders, the company
is nationalized.
 Intrinsic value of share
Each share has an intrinsic worth or
value which depends upon the benefits that
the holder of a share expects to receive in
future from the share in the form of dividends
and capital appreciation. The investment
decision of the investor to buy or sell a price is
based on a comparison between intrinsic
value of the share and its current market price.
 Over priced and under priced Share

Under priced shares: If the market price of a

share is currently lower than its intrinsic
value, such a share would be bought because it
is perceived to be Under priced share.
Over priced share: A share whose, current
market value is higher than its intrinsic value
would to be considered as overpriced and hence
sold.
 Continue……
The analyst believes that the market price of a
reflection of its intrinsic value. Though, in the
short run, the market price may deviate from
intrinsic value, in long run the price would
move along with the intrinsic value of the share.
The market price of a share and its intrinsic
value are thus the two basic inputs necessary for
the investment decision.
 Techniques of Equity Valution
(A) Balance Sheet Techniques
1.Book Value

2.Liquidation Value

3.Replacement Cost
 Continue…..
(B) Discounted Cash Flow Techniques
1. One year holding
2. Multi year holding
3. constant growth model
4. Multiple growth model
 Continue…..
(C) Relative Valuation Techniques
1.Price Earning Ratio
2.Price Book Ratio

3.Price Sales Ratio

 APPLICATIONS

It provides a basic knowledge of theories and

practices of investment management and security
analysis. It familiarizes with the concept such as
risk calculation and diversification in portfolio. It
helps to the know the different approaches to
security analysis namely fundamental analysis,
industry analysis and company analysis.

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 References
 S.Kevin: Security Analysis and Portfolio Management,
PHI Learning.
 Punithavathy Pandian: Security Analysis and Portfolio
Management, Vikas House Publisher.
 Prasanna Chandra: Investment Analysis and Portfolio
Management, McGraw Hill Education
 Stephen Lofthouse, Jane Raybould: Investment
Management, John Wiley & Sons Publications.
 Amling Fredrick: Investment- An Introduction to
Analysis and Management, Prentice Hall India.
 Donald E. Fischer and Ronald J. Jordan: Security
Analysis and Portfolio Management, Pearson Education.
THANK YOU

For queries
Email: virender.usb@cumail.in