CHAPTER 6
Hybrid Techniques for Valuation
The purpose of science is not to analyze or describe but to make useful models of the world. A model is useful if it allows us to get use out of it.
—Edward de Bono
VALUATION HAS MANY FACETS, as explained in preceding chapters. Valuing a company requires appreciation for what the company owns (assets minus liabilities), for how the company can generate future funds (via earnings and cash flow), and for how the capital marketplace perceives this wealth-creating potential (stock price). Careful analysis of any one of these aspects of value can improve an investor’s sense of a company’s worth and hence the possible price ranges for buy, sell, and hold decisions. But valuation need not stop there. These ...
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