Equity Asset Valuation

ISBN-13: 9781119628101 / Angielski / Twarda / 2020 / 720 str.

Jerald E. Pinto

Spis treści

Preface xiiiAcknowledgments xvAbout the CFA Investment Series xviiChapter 1 Overview of Equity Securities 1Learning Outcomes 11. Introduction 12. Equity Securities in Global Financial Markets 23. Types and Characteristics of Equity Securities 83.1. Common Shares 93.2. Preference Shares 114. Private versus Public Equity Securities 135. Investing in Non-Domestic Equity Securities 155.1. Direct Investing 175.2. Depository Receipts 176. Risk and Return Characteristics of Equity Securities 216.1. Return Characteristics of Equity Securities 216.2. Risk of Equity Securities 227. Equity Securities and Company Value 237.1. Accounting Return on Equity 247.2. The Cost of Equity and Investors' Required Rates of Return 288. Summary 29References 31Practice Problems 31Chapter 2 Introduction to Industry and Company Analysis 35Learning Outcomes 351. Introduction 362. Uses of Industry Analysis 363. Approaches to Identifying Similar Companies 373.1. Products and/or Services Supplied 373.2. Business-Cycle Sensitivities 383.3. Statistical Similarities 394. Industry Classification Systems 404.1. Commercial Industry Classification Systems 404.2. Governmental Industry Classification Systems 444.3. Strengths and Weaknesses of Current Systems 454.4. Constructing a Peer Group 465. Describing and Analyzing an Industry 505.1. Principles of Strategic Analysis 525.2. External Influences on Industry Growth, Profitability, and Risk 706. Company Analysis 776.1. Elements That Should Be Covered in a Company Analysis 776.2. Spreadsheet Modeling 807. Summary 81References 84Practice Problems 84Chapter 3 Equity Valuation: Concepts and Basic Tools 89Learning Outcomes 891. Introduction 902. Estimated Value and Market Price 903. Major Categories of Equity Valuation Models 924. Present Value Models: The Dividend Discount Model 944.1. Dividends: Background for the Dividend Discount Model 944.2. The Dividend Discount Model: Description 964.3. Preferred Stock Valuation 1004.4. The Gordon Growth Model 1034.5. Multistage Dividend Discount Models 1085. Multiplier Models 1125.1. Relationships among Price Multiples, Present Value Models, and Fundamentals 1125.2. The Method of Comparables 1165.3. Illustration of a Valuation Based on Price Multiples 1195.4. Enterprise Value 1216. Asset-Based Valuation 1237. Summary 127References 129Practice Problems 129Chapter 4 Equity Valuation: Applications and Processes 135Learning Outcomes 1351. Introduction 1352. Value Definitions and Valuation Applications 1362.1. What is Value? 1362.2. Applications of Equity Valuation 1393. The Valuation Process 1413.1. Understanding the Business 1423.2. Forecasting Company Performance 1523.3. Selecting the Appropriate Valuation Model 1533.4. Converting Forecasts to a Valuation 1603.5. Applying the Valuation Conclusion: The Analyst's Role and Responsibilities 1614. Communicating Valuation Results 1634.1. Contents of a Research Report 1634.2. Format of a Research Report 1654.3. Research Reporting Responsibilities 1665. Summary 168References 169Practice Problems 170Chapter 5 Return Concepts 177Learning Outcomes 1771. Introduction 1772. Return Concepts 1782.1. Holding Period Return 1782.2. Realized and Expected (Holding Period) Returns 1792.3. Required Return 1792.4. Expected Return Estimates from Intrinsic Value Estimates 1812.5. Discount Rate 1832.6. Internal Rate of Return 1833. The Equity Risk Premium 1843.1. Historical Estimates 1863.2. Forward-Looking Estimates 1944. The Required Return on Equity 1984.1. The Capital Asset Pricing Model 1984.2. Multifactor Models 2064.3. Build-Up Method Estimates of the Required Return on Equity 2134.4. The Required Return on Equity: International Issues 2175. The Weighted Average Cost of Capital 2186. Discount Rate Selection in Relation to Cash Flows 2207. Summary 220References 222Practice Problems 223Chapter 6 Industry and Company Analysis 229Learning Outcomes 2291. Introduction 2302. Financial Modeling: An Overview 2302.1. Income Statement Modeling: Revenue 2302.2. Income Statement Modeling: Operating Costs 2362.3. Income Statement Modeling: Non-operating Costs 2492.4. Income Statement Modeling: Other Items 2532.5. Balance Sheet and Cash Flow Statement Modeling 2542.6. Scenario Analysis and Sensitivity Analysis 2563. The Impact of Competitive Factors on Prices and Costs 2584. Inflation and Deflation 2664.1. Sales Projections with Inflation and Deflation 2674.2. Cost Projections with Inflation and Deflation 2725. Technological Developments 2746. Long-Term Forecasting 285Case Study: Estimating Normalized Revenue 2867. Building a Model 2917.1. Industry Overview 2917.2. Company Overview 2927.3. Construction of Pro Forma Income Statement 2937.4. Construction of Pro Forma Cash Flow Statement and Balance Sheet 2997.5. Valuation Inputs 3048. Summary 305References 306Practice Problems 306Chapter 7 Discounted Dividend Valuation 313Learning Outcomes 3131. Introduction 3142. Present Value Models 3152.1. Valuation Based on the Present Value of Future Cash Flows 3152.2. Streams of Expected Cash Flows 3173. The Dividend Discount Model 3223.1. The Expression for a Single Holding Period 3233.2. The Expression for Multiple Holding Periods 3244. The Gordon Growth Model 3264.1. The Gordon Growth Model Equation 3264.2. The Links Among Dividend Growth, Earnings Growth, and Value Appreciation in the Gordon Growth Model 3344.3. Share Repurchases 3344.4. The Implied Dividend Growth Rate 3354.5. The Present Value of Growth Opportunities 3364.6. Gordon Growth Model and the Price-to-Earnings Ratio 3394.7. Estimating a Required Return Using the Gordon Growth Model 3414.8. The Gordon Growth Model: Concluding Remarks 3425. Multistage Dividend Discount Models 3425.1. Two-Stage Dividend Discount Model 3435.2. Valuing a Non-Dividend-Paying Company 3465.3. The H-Model 3475.4. Three-Stage Dividend Discount Models 3495.5. Spreadsheet (General) Modeling 3545.6. Estimating a Required Return Using Any DDM 3565.7. Multistage DDM: Concluding Remarks 3576. The Financial Determinants of Growth Rates 3586.1. Sustainable Growth Rate 3586.2. Dividend Growth Rate, Retention Rate, and ROE Analysis 3606.3. Financial Models and Dividends 3637. Summary 365References 367Practice Problems 368Chapter 8 Free Cash Flow Valuation 383Learning Outcomes 3831. Introduction to Free Cash Flows 3842. FCFF and FCFE Valuation Approaches 3852.1. Defining Free Cash Flow 3852.2. Present Value of Free Cash Flow 3862.3. Single-Stage (Constant-Growth) FCFF and FCFE Models 3873. Forecasting Free Cash Flow 3893.1. Computing FCFF from Net Income 3893.2. Computing FCFF from the Statement of Cash Flows 3933.3. Noncash Charges 3943.4. Computing FCFE from FCFF 4003.5. Finding FCFF and FCFE from EBIT or EBITDA 4053.6. FCFF and FCFE on a Uses-of-Free-Cash-Flow Basis 4073.7. Forecasting FCFF and FCFE 4093.8. Other Issues in Free Cash Flow Analysis 4144. Free Cash Flow Model Variations 4194.1. An International Application of the Single-Stage Model 4204.2. Sensitivity Analysis of FCFF and FCFE Valuations 4214.3. Two-Stage Free Cash Flow Models 4224.4. Three-Stage Growth Models 4304.5. ESG Considerations in Free Cash Flow Models 4315. Nonoperating Assets and Firm Value 4366. Summary 436References 438Practice Problems 438Chapter 9 Market-Based Valuation: Price and Enterprise Value Multiples 455Learning Outcomes 4551. Introduction 4562. Price and Enterprise Value Multiples in Valuation 4572.1. The Method of Comparables 4572.2. The Method Based on Forecasted Fundamentals 4593. Price Multiples 4603.1. Price to Earnings 4603.2. Price to Book Value 4923.3. Price to Sales 5033.4. Price to Cash Flow 5103.5. Price to Dividends and Dividend Yield 5154. Enterprise Value Multiples 5184.1. Enterprise Value to EBITDA 5194.2. Other Enterprise Value Multiples 5244.3. Enterprise Value to Sales 5254.4. Price and Enterprise Value Multiples in a Comparable Analysis: Some Illustrative Data 5265. International Considerations When Using Multiples 5286. Momentum Valuation Indicators 5297. Valuation Indicators: Issues in Practice 5357.1. Averaging Multiples: The Harmonic Mean 5357.2. Using Multiple Valuation Indicators 5378. Summary 542References 544Practice Problems 546Chapter 10 Residual Income Valuation 559Learning Outcomes 5591. Introduction 5602. Residual Income 5602.1. The Use of Residual Income in Equity Valuation 5632.2. Commercial Implementations 5643. The Residual Income Model 5653.1. The General Residual Income Model 5683.2. Fundamental Determinants of Residual Income 5733.3. Single-Stage Residual Income Valuation 5743.4. Multistage Residual Income Valuation 5754. Residual Income Valuation in Relation to Other Approaches 5804.1. Strengths and Weaknesses of the Residual Income Model 5824.2. Broad Guidelines for Using a Residual Income Model 5835. Accounting and International Considerations 5845.1. Violations of the Clean Surplus Relationship 5855.2. Balance Sheet Adjustments for Fair Value 5945.3. Intangible Assets 5945.4. Nonrecurring Items 5975.5. Other Aggressive Accounting Practices 5985.6. International Considerations 5986. Summary 599References 601Practice Problems 602Chapter 11 Private Company Valuation 611Learning Outcomes 6111. Introduction 6122. The Scope of Private Company Valuation 6122.1. Private and Public Company Valuation: Similarities and Contrasts 6122.2. Reasons for Performing Valuations 6143. Definitions (Standards) of Value 6164. Private Company Valuation Approaches 6184.1. Earnings Normalization and Cash Flow Estimation Issues 6194.2. Income Approach Methods of Private Company Valuation 6254.3. Market Approach Methods of Private Company Valuation 6354.4. Asset-Based Approach to Private Company Valuation 6434.5. Valuation Discounts and Premiums 6444.6. Business Valuation Standards and Practices 6515. Summary 652References 654Practice Problems 654Glossary 661About the Editors 671About the CFA Program 673Index 675