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Equity Valuation: Models from Leading Investment Banks

Name: Equity Valuation: Models from Leading Investment Banks
ISBN: 9780470031490

by Jan Viebig, Thorsten Poddig, Armin Varmaz

June 2008

Beginner to intermediate

440 pages

11h 56m

English

Wiley

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Cover Page
Dedication
Title Page
Copyright
Contents
Foreword
Preface
Acknowledgments
Abbreviations
Part I: Discounted Cash Flow (DCF) Models1

Chapter 1: Introduction
Chapter 2: The Fundamental Value of Stocks and Bonds
Chapter 3: Discounted Cash Flow Models: The Main Input Factors
3.1 ANALYTICAL BALANCE SHEETS AND FREE CASH FLOW DISCOUNT MODELS3.2 THE DIVIDEND DISCOUNT MODEL3.3 THE FREE CASH FLOW TO THE FIRM (FCFF) MODEL
Part II: Monte Carlo Free Cash Flow to the Firm (MC-FCFF) Models (Deutsche Bank/DWS)1
Chapter 4: Introduction
Chapter 5: Standard FCFF Model
5.1 NET REVENUES5.2 COST STRUCTURE AND OPERATING INCOME5.3 RECONCILING OPERATING INCOME TO FCFF5.4 THE FINANCIAL VALUE DRIVER APPROACH5.5 FUNDAMENTAL ENTERPRISE VALUE AND MARKET VALUE5.6 BAIDU'S SHARE PRICE PERFORMANCE 2005–2007
Chapter 6: Monte Carlo FCFF Models
6.1 MONTE CARLO SIMULATION: THE IDEA6.2 MONTE CARLO SIMULATION WITH @RISK6.3 DISCLAIMERReferences
Part III: Beyond Earnings: A User's Guide to Excess Return Models and the HOLT CFROI® Framework1
Chapter 7: Introduction 1
Chapter 8: From Accounting to Economics – Part I
Chapter 9: From Economics to Valuation – Part I
Chapter 10: Where Does Accounting Go Wrong?
Chapter 11: From Accounting to Economics: CFROI
11.1 THE BASICS11.2 CFROI ADJUSTMENTS USING VODAFONE'S MARCH 2005 ANNUAL REPORT11.3 CFROI CALCULATION FOR VODAFONE11.4 A COMMENT ON GOODWILL
Chapter 12: From Accounting to Economics: Economic Profit
12.1 THE BASICS12.2 CAVEATS12.3 EP ADJUSTMENTS USING VODAFONE MARCH 2005 ANNUAL REPORT
Chapter 13: From Economics to Valuation – Part II
13.1 GENERAL RULES13.2 MARKET VALUE ADDED13.3 CFROI13.4 A WORD ON DEBT13.5 VALUATION13.6 VALUATION OF VODAFONE13.7 EP OR CFROI?13.8 A FINAL WORD
Appendix 1
Appendix 2
Part IV: Morgan Stanley ModelWare's Approach to Intrinsic Value: Focusing on Risk-Reward Trade-offs1
Chapter 14: Introduction
Chapter 15: Linking Fundamental Analysis to the Inputs of the Valuation Model
Chapter 16: Our Valuation Framework
Chapter 17: Linking Business Activity to Intrinsic Value: The ModelWare Profitability Tree
Chapter 18: ModelWare's Intrinsic Value Approach
Chapter 19: Treatment of Key Inputs
Chapter 20: The Cost of Capital
20.1 RISK-FREE RATE20.2 EQUITY RISK PREMIUM20.3 BETA-ESTIMATION
Chapter 21: Summary and Conclusions
Appendix
References
Part V: UBS VCAM and EGQ Regression-based Valuation1
Chapter 22: Introducing “EGQ” – Where Intrinsic Methods and Empirical Techniques Meet
Chapter 23: A Quick Guide to DCF and Economic Profit Analysis
23.1 POWERFUL ANALYTICAL FRAMEWORKS, BUT NOT A COMPLETE SOLUTION23.2 DYNAMICS OF ECONOMIC PROFIT ANALYSIS23.3 “UNADULTERATED EVA”23.4 VALUE DYNAMIC 1: ROIC23.5 VALUE DYNAMIC 2: INVESTED CAPITAL23.6 VALUE DYNAMIC 3: WACC23.7 VALUE DYNAMIC 4: THE VALUE CREATION HORIZON23.8 COMBINING ALL FOUR VALUE DYNAMICS: EGQ
Chapter 24: Regression-based Valuation
Chapter 25: UBS Economic Growth Quotient
25.1 THE EGQ CALCULATION25.2 EGQ SPECIAL ATTRIBUTES
Chapter 26: UBS EGQ Regression Valuation
26.1 INTRINSIC MEETS RELATIVE VALUATION26.2 EGQ REGRESSIONS: RELATIVE VALUATION THEATER26.3 EGQ REGRESSIONS: A LAYERED ALPHA FRAMEWORK26.4 Y -INTERCEPT INDICATES COST OF CAPITAL26.5 SLOPE VS. Y -INTERCEPT INDICATES STYLE26.6 EMERGENT VALUATION26.7 WHY REGRESS EGQ VS. EV/NOPAT?26.8 THINK OPPOSITE WHEN UNDER THE X -AXIS
Chapter 27: Understanding Regressions
27.1 KEY TAKEAWAYS27.2 THE LINE – WHAT IS THE RELATIONSHIP?27.3 THE EXPLANATORY POWER OR STRENGTH OF THE RELATIONSHIP27.4 RELIABILITY OR CONFIDENCE IN THE QUANTIFIED RELATIONSHIP27.5 REGRESSION OUTLIERS27.6 BEWARE OF OUTLIERS IN EGQ REGRESSIONS
Chapter 28: Appendix Discussions
28.1 EGQ'S MUTED SENSITIVITY TO ASSUMED WACC28.2 EV/IC VS. ROIC/WACC REGRESSIONS28.3 PE VS. EPS GROWTH REGRESSIONS OR PEG RATIOS28.4 RETURN METRICS: ROIC VS. CFROI28.5 ACCRUAL VS. CASH FLOW RETURN MEASURES28.6 ROIC VS. CFROI28.7 ADJUSTING INVESTED CAPITAL IMPORTANT, BUT NOT FOR EGQReferences
Part VI: Leverage Buyout (LBO) Models1
Chapter 29: Introduction
Chapter 30: Leveraged Buyouts
Chapter 31: IRRs and the Structure of LBO Models
Chapter 32: Assumptions of LBO Models
Chapter 33: Example: Continental AG
33.1 BACKGROUND33.2 LBO MODELING APPROACH – APPROPRIATE LEVEL OF DETAIL33.3 KEY LBO PARAMETERS33.4 STEP-BY-STEP WALK THROUGH THE MODEL
Chapter 34: A Word of Caution
References
Part VII: Valuation 101: Approaches and Alternatives
Chapter 35: Introduction
Chapter 36: Overview of Valuation
Chapter 37: Discounted Cash Flow Valuation
37.1 ESSENCE OF DISCOUNTED CASHFLOW VALUATION37.2 DISCOUNT RATE ADJUSTMENT MODELS37.3 CERTAINTY EQUIVALENT MODELS37.4 EXCESS RETURN MODELS37.5 ADJUSTED PRESENT VALUE MODELS37.6 VALUE ENHANCEMENT IN THE DCF WORLD
Chapter 38: Liquidation and Accounting Valuation
38.1 BOOK VALUE-BASED VALUATION38.2 LIQUIDATION VALUATION38.3 VALUE ENHANCEMENT IN THE ACCOUNTING WORLD
Chapter 39: Relative Valuation
39.1 STEPS IN RELATIVE VALUATION39.2 BASIS FOR APPROACH39.3 STANDARDIZED VALUES AND MULTIPLES39.4 DETERMINANTS OF MULTIPLES39.5 COMPARABLE FIRMS39.6 CONTROLLING FOR DIFFERENCES ACROSS FIRMS39.7 VALUE ENHANCEMENT IN THE RELATIVE VALUATION WORLD
Chapter 40: Real Option Valuation
40.1 BASIS FOR APPROACH40.2 THE ESSENCE OF REAL OPTIONS40.3 EXAMPLES OF REAL OPTIONS40.4 VALUE ENHANCEMENT IN THE REAL OPTIONS WORLD
Chapter 41: Closing Thoughts on Value Enhancement
References
Part VIII: Final Thoughts on Valuation1
Chapter 42: Introduction
Chapter 43: Valuation in Theory: The Valuation of a Single Asset
43.1 CERTAIN CASH FLOWS43.2 UNCERTAIN CASH FLOWS43.3 RISK PREMIA43.4 CERTAINTY EQUIVALENTS AND UTILITY-BASED VALUATION43.5 RISK NEUTRAL PROBABILITIES
Chapter 44: Outlook: The Multi-asset Valuation and Allocation Case
Chapter 45: Summary
References
Index

Content preview from Equity Valuation: Models from Leading Investment Banks

Part I

Discounted Cash Flow (DCF) Models¹

Jan Viebig²and Thorsten Poddig³

² Managing Director, DWS Investment GmbH.

³ Professor of Finance, University of Bremen.

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