A stock trading at 15 times earnings can look cheap – until you discover that similar companies normally trade at 10 times. Another stock trading at 30 times earnings might look expensive, yet its future […]
Category: Valuation Models
A discounted cash flow model can contain dozens of carefully researched assumptions, yet one number near the bottom of the spreadsheet can still determine most of the final valuation. That number is terminal value. Terminal […]
Most stock valuation models have one uncomfortable weakness: they usually pretend there is only one future. Revenue grows at a certain rate, margins reach a specific level, interest rates behave as expected, and the company […]
A discounted cash flow model can look extremely scientific. Open a spreadsheet, forecast revenue for ten years, calculate free cash flow, apply a discount rate, estimate terminal value, and suddenly the model produces a share […]
The price-to-earnings ratio is popular for a good reason. It is simple, fast, and gives investors an immediate way to compare a company’s share price with its reported earnings. Unfortunately, simple does not always mean […]