《Equity Valuation》.pdf

Equity Valuation Equity Valuation Basic Types of Models Basic Types of Models • Balance sheet models • Balance sheet models • Dividend discount models • Dividend discount models • EPS (cashflow) discount models • EPS (cashflow) discount models Modeling Framework Modeling Framework • Deterministicdynamics • Deterministicdynamics • Stochastic dynamics • Stochastic dynamics Fair Value vs Market Price Fair Value vs Market Price Fair Value Fair Value • Self assigned Value • Self assigned Value • Variety of models are used for estimation • Variety of models are used for estimation Market Price Market Price • Consensus value assessment by all market participants • Consensus value assessment by all market participants Trading Signal Trading Signal • FV MP: Buy • FV MP: Buy • FV MP: Sell or Short Sell • FV MP: Sell or Short Sell • FV = MP: Hold or Fairly Priced • FV = MP: Hold or Fairly Priced Dividend Discount Models Dividend Discount Models ∞ Dt Vo = ∑ t t = 1 (1+ k ) V = Value of Stock V0 = Value of Stock 0 D = Dividend D = Dividend t t k = required return k = required return No Growth Model No Growth Model D V o = k Where the stock has earnings and dividends that are Where the stock has earnings and dividends that are expected to remain constant foreever. expected to remai