Download or read book The Use of Residual Income Valuation Methods by U S Sell Side Equity Analysts written by John R. M. Hand and published by . This book was released on 2016 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the use of residual income (RI) valuation methods by U.S. sell-side equity analysts, particularly as compared to DCF. We document that RI valuations are rare -- just 1/16th as common as DCF -- and that different RI and DCF valuations are not infrequently provided by the same analyst for the same firm in the same report. We find that while analysts build their RI models around both net operating income (RNOA-RI) and net income (ROE-RI), analysts' RNOA-RI valuations are as optimistic as their DCF valuations and contain RNOAs that increase to an economically implausible terminal year median of 27%. In contrast, analysts' ROE-RI valuations contain ROEs that decline over the forecast horizon to a more plausible terminal year median of 17%. While optimistic when done on their own, analysts' ROE-RI valuations are unbiased when done in tandem with DCF, as are the DCFs that accompany them.

Download or read book Valuation Model Use and the Price Target Performance of Sell Side Equity Analysts written by Cristi A. Gleason and published by . This book was released on 2011 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the influence of inferred valuation model use on the investment performance of sell-side equity analysts' published price target opinions. There is limited and inconclusive evidence on how analysts' price targets are determined and on their value for investment decisions. Using a broad sample of 45,693 price targets provided to First Call by sell-side analysts during 1997 through 2003, we first show that price targets have investment value because they predict future stock returns. Next, we develop and implement an innovative large-sample procedure for inferring valuation model use from the observed correlation between analysts' price targets and two researcher-constructed stock valuation estimates that differ in simplicity and rigor. Reliance on a less rigorous valuation model may diminish the investment advantage associated with an analyst's more accurate earnings forecasts but it may also mitigate the disadvantage of less accurate forecasts. We test whether the apparent use of a more rigorous valuation technique yields higher quality price targets as measured by realized investment returns over a 12-month horizon, controlling for possible differences in earnings forecast accuracy. The central message from our data is that price targets exhibit superior investment performance when analysts appear to be using a fundamental residual income (RIM) stock valuation technique rather than a simple price-earnings-growth (PEG) valuation heuristic. This investment advantage is reduced when analysts' earnings forecasts are inaccurate. Our results underscore the importance of valuation model choice to analyst's stock investment evaluation process.

Download or read book Best Practices for Equity Research PB written by James Valentine and published by McGraw Hill Professional. This book was released on 2011-01-07 with total page 465 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first real-world guide for training equity research analysts—from a Morgan Stanley veteran Addresses the dearth of practical training materials for research analysts in the U.S. and globally Valentine managed a department of 70 analysts and 100 associates at Morgan Stanley and developed new programs for over 500 employees around the globe He will promote the book through his company's extensive outreach capabilities

Download or read book Recent Advances in Economics and Administration Sciences Concepts Researches and Applications written by Ahmet Niyazi ÖZKER and published by Livre de Lyon. This book was released on 2023-03-25 with total page 301 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent Advances in Economics and Administration Sciences Concepts, Researches and Applications

Download or read book Handbook of Banking and Finance in Emerging Markets written by Nguyen, Duc K. and published by Edward Elgar Publishing. This book was released on 2022-10-14 with total page 867 pages. Available in PDF, EPUB and Kindle. Book excerpt: Emerging markets are increasingly facing significant challenges, from a slowdown in productivity, rising debt, and trade tensions to the adverse effects of proliferating global uncertainty on domestic financial systems. This incisive Handbook examines the ongoing dynamics of global financial markets and institutions within the context of such rising uncertainty and provides a comprehensive overview of innovative models in banking and finance.

Download or read book Valuation Approaches and Metrics written by Aswath Damodaran and published by Now Publishers Inc. This book was released on 2005 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation approaches. We begin by surveying the literature on discounted cash flow valuation models, ranging from the first mentions of the dividend discount model to value stocks to the use of excess return models in more recent years. In the second part of the paper, we examine relative valuation models and, in particular, the use of multiples and comparables in valuation and evaluate whether relative valuation models yield more or less precise estimates of value than discounted cash flow models. In the final part of the paper, we set the stage for further research in valuation by noting the estimation challenges we face as companies globalize and become exposed to risk in multiple countries.

Download or read book Applied Equity Analysis Stock Valuation Techniques for Wall Street Professionals written by James English and published by McGraw Hill Professional. This book was released on 2001-06-18 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt: Applied Equity Analysis treats stock valuation as a practical, hands-on tool rather than a vague, theoretical exercise—and covers the entire valuation process from financial statement analysis through the final investment recommendation. Its integrated approach to valuation builds viable connections between a firm’s competitive situation and the ultimate behavior of its common stock. Techniques explained include EVA, newer hybrid valuation techniques, and relative multiple analysis.

Download or read book Corporate Valuation written by Mario Massari and published by John Wiley & Sons. This book was released on 2016-07-15 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk consideration is central to more accurate post-crisis valuation Corporate Valuation presents the most up-to-date tools and techniques for more accurate valuation in a highly volatile, globalized, and risky business environment. This insightful guide takes a multidisciplinary approach, considering both accounting and financial principles, with a practical focus that uses case studies and numerical examples to illustrate major concepts. Readers are walked through a map of the valuation approaches proven most effective post-crisis, with explicit guidance toward implementation and enhancement using advanced tools, while exploring new models, techniques, and perspectives on the new meaning of value. Risk centrality and scenario analysis are major themes among the techniques covered, and the companion website provides relevant spreadsheets, models, and instructor materials. Business is now done in a faster, more diverse, more interconnected environment, making valuation an increasingly more complex endeavor. New types of risks and competition are shaping operations and finance, redefining the importance of managing uncertainty as the key to success. This book brings that perspective to bear in valuation, providing new insight, new models, and practical techniques for the modern finance industry. Gain a new understanding of the idea of "value," from both accounting and financial perspectives Learn new valuation models and techniques, including scenario-based valuation, the Monte Carlo analysis, and other advanced tools Understand valuation multiples as adjusted for risk and cycle, and the decomposition of deal multiples Examine the approach to valuation for rights issues and hybrid securities, and more Traditional valuation models are inaccurate in that they hinge on the idea of ensured success and only minor adjustments to forecasts. These rules no longer apply, and accurate valuation demands a shift in the paradigm. Corporate Valuation describes that shift, and how it translates to more accurate methods.

Download or read book Equity Asset Valuation written by Jerald E. Pinto and published by John Wiley & Sons. This book was released on 2015-10-16 with total page 624 pages. Available in PDF, EPUB and Kindle. Book excerpt: Navigate equity investments and asset valuation with confidence Equity Asset Valuation, Third Edition blends theory and practice to paint an accurate, informative picture of the equity asset world. The most comprehensive resource on the market, this text supplements your studies for the third step in the three-level CFA certification program by integrating both accounting and finance concepts to explore a collection of valuation models and challenge you to determine which models are most appropriate for certain companies and circumstances. Detailed learning outcome statements help you navigate your way through the content, which covers a wide range of topics, including how an analyst approaches the equity valuation process, the basic DDM, the derivation of the required rate of return within the context of Markowitz and Sharpe's modern portfolio theory, and more. Equity investments encompass the buying and holding of shares of stock in the anticipation of collecting income from dividends and capital gains. Determining which shares will be profitable is key, and an array of valuation techniques is applied on today's market to decide which stocks are ripe for investment and which are best left out of your portfolio. Access the most comprehensive equity asset valuation text on the market Leverage detailed learning outcome statements that focus your attention on key concepts, and guide you in applying the material accurately and effectively Explore a wide range of essential topics, such as the free cash flow approach, valuation using Graham and Dodd type concepts of earning power, associated market multiples, and residual income models Improve your study efforts by leveraging the text during your CFA certification program prep Equity Asset Valuation, Third Edition is a comprehensive, updated text that guides you through the information you need to know to fully understand the general analysis of equity investments.

Download or read book Extended Dividend Cash Flow and Residual Income Valuation Models written by and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard equity valuation approaches (i.e., DDM, RIM, and DCF model) are derived under the assumption of ideal conditions, such as infinite payoffs and clean surplus accounting. Because these conditions are hardly ever met, we extend the standard approaches, based on the fundamental principle of financial statement articulation. The extended models are then tested empirically by employing two sets of forecasts: (1) analyst forecasts provided by Value Line and (2) forecasts generated by cross-sectional regression models. The main result is that our extended models yield considerably smaller valuation errors. Moreover, by construction, identical value estimates are obtained across the extended models. By reestablishing empirical equivalence under non-ideal conditions, our approach provides a benchmark that enables us to quantify the errors resulting from individual deviations from ideal conditions, and thus, to analyze the robustness of the standard approaches. Finally, by providing a level playing field for the different valuation approaches, our findings have implications for other empirical settings, for example, estimating the implied cost of capital. -- Dirty Surplus ; Terminal Value ; Steady-State ; Valuation Error

Download or read book Equity Valuation for Analysts and Investors written by James Kelleher and published by McGraw Hill Professional. This book was released on 2010-07-07 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: Create comprehensive stock valuation models--quickly and efficiently "This amazingly thorough book takes you through real-world financial modeling, provides concise techniques and methods for determining asset value, and offers a blended valuation approach that is responsive to changes in market dynamics. Peer Derived Value, introduced in the book, represents an original and commonsense approach to valuing a stock within its peer group. This book, in my view, is an invaluable addition to any investor's library." -- William V. Campbell, Chairman, Intuit Corporation Equity Valuation for Analysts and Investors introduces you to the financial statement analysis and model-building methodology used by leading equity research firm Argus Research. Written by Jim Kelleher, the company's director of research, the book offers the tools for estimating individual equity cash value. These include a completely original and proprietary valuation methodology, Peer Derived Value, which values an equity based on the stock's current variation from its historical relation to a user-specifi ed peer group. In a conveniently organized format, this in-depth guide covers all the tasks you need to master, including: • Financial statement modeling • Comparables analysis • Discounted free cash fl ow • Industry matrix models • Blending valuation inputs to calculate fair value in any market environment Valuing and predicting the future value of assets and stocks is a laborious task. Successful analysts and investors don't have time for tedious work that is outdated as soon as it's done. Equity Valuation for Analysts and Investors is the comprehensive guide to efficient financial statement analysis and model-building from one of the world-leading independent equity research firms, Argus Research. At the helm of the company's research is author Jim Kelleher, who developed his methodology and model-building techniques during his twenty years covering more than a dozen industries in nearly every sector. A good valuation model is an invaluable tool to help the serious investor: Wring more information from the 10-K and 10-Q Predict unexpected earnings shortfall or positive earnings surprises Master the art of "valuation choreography" One of the biggest challenges to making accurate predictions with a valuation model today is the rapid and constant fluctuation of data. Equity Valuation for Analysts and Investors provides a tried-and-true process for creating effective, compact models that add new measurement and valuation periods and accommodate a company’s unique data presentation and reporting style. This versatile guidebook also provides both a rigorous process and a shortcut for each step in modeling financial statement data so analysts can customize their data focus based on their position in the value chain. When implemented in the real world, the valuation model uses the power of Excel to allow investors to quickly and accurately update their valuations and predictions by simply inputting adjusted data. Take control of your investments now by managing them based on your own research and Equity Valuation for Analysts and Investors.

Download or read book Residual Income Model and Abnormal Returns written by Marco Pinochi and published by . This book was released on 2019 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the return forecasting ability of a residual income model based on analysts' estimates and time-varying risk-free rates, equity risk premiums and terminal value growths, in US and Europe, along the period 1995-2018. While the academic literature acknowledged the reliability of the model, practitioners and especially market operators paid scarce attention to it. Therefore, in a framework where market inefficiencies are admitted, a valuation model that shows superior predicting power for returns, at least compared to main market multiples and analysts' recommendations, should be considered in providing better empirical estimates of intrinsic value. We display three major results: a) RIM-based V/P portfolios yield statistically significant alphas relative to market indexes; b) outperform portfolios built through other factors, reporting higher Sharpe ratios and information ratios; c) remarkably beat analysts' buy-sell recommendations. Furthermore, two facts stand out: RIM proves to be extremely effective in signaling overvalued stocks and producing substantial long-short returns; the simpler RIM model studied generatesbetter outcomes than the more complex one.

Download or read book Three Residual Income Valuation Methods and Discounted Cash Flow Valuation written by Pablo Fernandez and published by . This book was released on 2019 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: I show that the three residual Income models for equity valuation always yield the same value as the Discounted Cash Flow Valuation models.lt;brgt;lt;brgt;I use three residual income measures: Economic Profit (EP), Economic Value Added (EVA) and Cash Value Added (CVA). I first show that the present value of the EP discounted at the required return to equity plus the equity book value equals the value of equity (the present value of the Equity cash flow discounted at the required return to equity).lt;brgt;lt;brgt;Then, I show that the present value of the EVA discounted at the WACC plus the enterprise book value (equity plus debt) equals is the enterprise market value ( the present value of the Free cash flow discounted at the WACC).lt;brgt;lt;brgt;Then, I show that the present value of the CVA discounted at the WACC plus the enterprise book value (equity plus debt) is also equal to the enterprise market value.

Download or read book Valuation Techniques written by David T. Larrabee and published by John Wiley & Sons. This book was released on 2012-11-06 with total page 628 pages. Available in PDF, EPUB and Kindle. Book excerpt: Analysis and insights from top thought leaders on a pivotal topic in investing and asset management Valuation is the cornerstone for investment analysis, and a thorough understanding and correct application of valuation methodologies are critical for long-term investing success. Edited by two leading valuation experts from CFA Institute, this book brings together the insights and expertise of some of the most astute and successful investment minds of the past 50 years. From Benjamin Graham, the “father of value investing,” to Aswath Damodaran, you’ll learn what these investment luminaries have to say about investment valuation techniques, including earnings and cash flow analysis. Features the best thinking on valuation from the industry’s masters on the topic, supplemented with dozens of fascinating and instructive real-world examples Comprehensively discusses special valuation situations, such as real options, employee stock options, highly leveraged firms, corporate takeovers, and more Supplies you with the tools you need to successfully navigate and thrive in the ever-changing financial markets Is being produced with the full support and input of CFA Institute, the world’s leading association of investment professionals

Download or read book Purchase Pooling and Equity Analysts Valuation Judgments written by Patrick E. Hopkins and published by . This book was released on 2014 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether analysts' common-stock valuation judgments are predictably affected by (1) different methods of accounting for business combinations and (2) the number of years that elapse after the business combinations occur. Numerous articles in the business press suggest that companies go to great lengths to avoid amortization of the purchase-method acquisition premium, either by structuring acquisitions to qualify for pooling treatment or aggressively allocating the acquisition premium to quot;in-processquot; research and development (IPRD) and immediately expensing it. Firms' reluctance to capitalize and amortize the acquisition premium often is based on their managers' belief that amortizing the acquisition premium impairs firm value, especially in years subsequent to the transaction. However, research to date neither refutes nor defends this belief. We report the results of an experiment in which 113 buy-side equity analysts participated. Consistent with our expectations, analysts' post-combination valuation judgments are lower when a parent company records and amortizes an acquisition premium in a purchase-method business combination and equivalently higher when the company either immediately expenses the entire purchase-method acquisition premium as IPRD or records the business combination using the pooling-of-interests method. In addition, in the case where the parent company records and amortizes an acquisition premium in a purchase-method business combination, analysts' stock-price judgments are significantly lower if the business combination occurred three years ago as compared to one year ago. We also test the FASB's proposal to report separate sub-totals (and related EPS figures) for pre-goodwill-amortization operating income, after-tax goodwill amortization, and net income. Our results suggest that the Board's proposed goodwill-reporting format mitigates the valuation difference between combinations that occurred one-year ago versus three-years ago. We discuss the implications of this study for users of financial accounting information and for accounting standard setters.

Download or read book Equity Valuation Using Multiples written by Andreas Schreiner and published by Springer Science & Business Media. This book was released on 2009-04-15 with total page 191 pages. Available in PDF, EPUB and Kindle. Book excerpt: Andreas Schreiner examines the role of multiples in equity valuation. He transforms the standard multiples valuation method into a comprehensive framework for using multiples in valuation practice, which corresponds to economic theory and is consistent with the results of a broad empirical study of European and U.S. equity markets.

Download or read book Analysis of the Residual Income Valuation and Abnormal Earnings Growth Models written by Jose Elias Feres de Almeida and published by . This book was released on 2015 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper revisits two valuation models based on accounting figures: the Residual Income Valuation (RIV) and Abnormal Earnings Growth (AEG). Our research design has two approaches: i) we demonstrate theoretical integration of both models; and ii) we show in a practical manner that models converge to the same results based on real data of analysts forecast consensus. We apply statistical tests on empirical data from analyst's forecasts available on Thomson One Analytics database. We use information of 45 firms listed on the IBovespa segment from BMF&BOVESPA in 2008 with historical data from 2003 to 2007 and analysts' projections from 2003 to 2010. Our results do not show a significant mean difference of the valuations, but those from the RIV model are more dispersed than those produced by the AEG model. Furthermore, our results are consistent with international evidences and present additional evidences of application of valuation models based on accounting information in Brazil. Our findings support the use of valuation models based on accounting figures by analysts, investors, rating agencies and regulators to provide additional analyses of firm's future prospects.