The Art of Company Valuation and Financial Statement Analysis: A Value Investor's Guide with Real-life Case Studies

Preface

We all know that Art is not truth. Art is a lie that makes us realize the truth, at least the truth that is given to us to understand.

Pablo Picasso

This book looks at the valuation and financial statement analysis of listed companies. Another suitable title could have been ‘Not another book on company valuation!’ Amazon.com displays more than 5,000 hits for this topic and a further 4,000 hits for financial statement analysis. Why do we need another book on this subject? Maybe you have noticed that the introductory quotation stems not from a famous economist, entrepreneur or investor, but from an artist. Company valuation is more art than science.

The figures and ratios that we obtain from any fundamental analysis do give us an overview, but figures are not everything. If pure calculation and comparison of key figures and ratios were sufficient for identifying undervalued or promising enterprises, this book would be superfluous and a computer could carry out all the necessary work in seconds. This is not the case. The findings that we derive from fundamental analysis only let us draw conclusions about how a company has developed thus far. Factors from a variety of areas, especially qualitative ones, will contribute to its future development. Financial market theory struggles with this fact. Most of today’s textbooks consist of abstract formulae, are full of Greek letters, and tend to be difficult to understand. This book, however, attempts to convey company valuation and ...