Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity

CHAPTER 11

Conclusion

Now we can do our best to assess all three valuation methods and draw some conclusions as to Walmart’s current valuation. Of course, we caution that this is just one of several possible points of view. Most important is that you gain the ability to understand the tools used so that you can make your own judgments to value businesses and investments. The best next step is to lay out a summary page consisting of estimates resulting from each of the three valuation methods. As each method depends on a wide range of variables, many of which change with market swings, we expand each output across a range as opposed to centering on one specific number. Even a range can hopefully suggest proper direction of a particular investment. The summary page should consist of a range of equity value, enterprise value, implied stock price, and an implied multiple. Let’s assess each valuation method, come up with a relative range, and then create the summary tab, which we will analyze to approximate value.

In addition to a summary output, we will create what is commonly known as a “football field” chart. This is a floating bar chart’a visual representation of the summary page. For many, it’s easier for both analysis and presentation purposes to establish an appropriate company value by drawing conclusions from the bar chart.

Please refer to the tab in the template titled “Football Field.” Notice the summary output table contains four categories: the three core valuation methods, ...