Book description
The Definitive Guide to Valuing Hard-to-Value Companies: Fully Revised for Today’s Financial Markets
Valuing money-making companies that have long histories and established business models is straightforward. It is when you encounter difficult-to-value companies that you feel the urge to go over to the dark side of valuation—where you abandon first principles and create new metrics. Aswath Damodaran looks at a range of these companies, from start-ups in new businesses to distressed companies, from banks facing regulatory turmoil to commodity firms, and from emerging market upstarts to multinationals that spread across geographies and businesses. With each grouping, he helps you examine the call of the dark side and its practices and frameworks to value these firms.
To answer these questions, Aswath looks at companies across the life cycle and in different markets, from Uber and Shake Shack at one end of the spectrum to Vale, Royal Dutch, and United Technologies at the other end.
In the process, you learn how to
- Deal with “abnormally low” and negative risk-free rates in valuation
- Adapt to dynamic and changing risk premiums
- Value young companies that are disrupting existing businesses
- Analyze commodity and cyclical companies across cycles
- Value a company as the sum of its parts or as an aggregation of its users/subscribers and customers
- Determine the difference between pricing and valuation, and why some investments can only be priced
Table of contents
- Cover Page
- Title Page
- Copyright Page
- Dedication Page
- Contents at a Glance
- Contents
- Acknowledgments
- About the Author
- Preface to the Third Edition
- 1. The Dark Side of Valuation
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Part I: Enlightenment: The Tools
- 2. Intrinsic Valuation
- 3. Probabilistic Valuation: Scenario Analysis, Decision Trees, and Simulations
- 4. Relative Valuation/Pricing
- 5. Real Options Valuation
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Part II: The Dark Side of Macro Inputs
- 6. A Shaky Base: A “Risky” Risk-Free Rate
- 7. Risky Ventures: Assessing the Price of Risk
- 8. Macro Matters: The Real Economy
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Part III: The Dark Side across the Life Cycle
- 9. Baby Steps: Young and Start-Up Companies
- 10. Shooting Stars: Valuing Growth Companies
- 11. The Grown-Ups: Mature Companies
- 12. Winding Down: Declining Companies
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Part IV: The Dark Side Across Company Types
- 13. Ups and Downs: Cyclical and Commodity Companies
- 14. Mark to Market: Valuing Financial Services Companies
- 15. Invisible Investments: Valuing Firms with Intangible Assets
- 16. Volatility Rules: Emerging-Market Companies
- 17. Going to Pieces: Disaggregated Value
- 18. The Cynic’s Corner: Value versus Price
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Part V: The Finale
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19. The Jedi Way: Vanquishing the Dark Side
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Enlightening Propositions
- Proposition 1: Be Steadfast on Principles, Open to New Tools, and Flexible on Estimates
- Proposition 2: Pay Heed to Markets, but Don’t Let Them Determine Your Valuations
- Proposition 3: Risk Matters
- Proposition 4: Growth Is Not Free and Is Not Always Value-Adding
- Proposition 5: All Good Things Come to an End
- Proposition 6: Watch Out for Truncation Risk
- Proposition 7: Look at the Past, but Think About the Future
- Proposition 8: Draw on the Law of Large Numbers
- Proposition 9: Accept Uncertainty, and Deal with It
- Proposition 10: Value = Stories + Numbers
- Conclusion
-
Enlightening Propositions
-
19. The Jedi Way: Vanquishing the Dark Side
- Index
Product information
- Title: Dark Side of Valuation, The: Valuing Young, Distressed, and Complex Businesses, Third edition
- Author(s):
- Release date: April 2018
- Publisher(s): Pearson FT Press
- ISBN: 9780134854267
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