38 pages carry this tag.
A high P/E is not a verdict of "expensive." It is a sentence the market is speaking about the future, and learning to read that sentence is where valuation actually begins.
Capital budgeting is the process of deciding which long-term investments a company should make.
A DCF (Discounted Cash Flow) model is the most principled way to value a business.
Relative valuation prices a company by comparing it to similar companies or recent transactions.
Some companies operate multiple, very different businesses, a conglomerate might own a cement plant, a hospitality chain, and a financial services arm.
The same valuation multiple applied to a bank and a software company would be meaningless.
In most DCF models, the terminal value, the value attributed to cash flows beyond the explicit forecast period, accounts for 60–80% of total enterprise value.
DCF is the most rigorous valuation framework, and the most abused. Because it accepts any inputs you choose, it can be used...
ESG-integrated valuation is not a separate valuation method, it is the discipline of systematically incorporating material ESG factors into the assumptions that drive DCF models and relative valuation.
The original fundamental analysis course: approaches, qualitative factors, the three statements, ratio categories, sector checks, red flags, and valuation models.
Market capitalisation is the total market value of all of a company's shares. It is the money you would need to buy 100 percent of the company at today's share price.
Enterprise value is the true cost of acquiring the whole business. It adds the debt you would inherit to the market cap and subtracts the cash you would gain.
Earnings per share is the slice of net profit that belongs to each share. It is the building block for the PE and PEG ratios.
The PE ratio tells you how many years of current earnings you are paying for a share. It is the most used, and most misused, valuation ratio.
The price to book ratio compares the share price with the book value per share, the accounting net worth that backs each share.
The PEG ratio adjusts the PE ratio for profit growth. It asks whether the multiple you are paying is justified by how fast earnings are growing.
The price to cash flow ratio compares the share price with operating cash flow per share. It uses money actually received instead of booked profit.
The price to sales ratio compares a company's market cap with its annual revenue. It is the multiple you fall back on when there are no earnings to divide by.
EV to EBITDA compares the total cost of acquiring a business, debt included, with its operating earnings before interest, tax, depreciation, and amortisation.
EV to sales compares the total cost of acquiring a business with its annual revenue. It is the price to sales ratio corrected for debt and cash.
Earnings yield is the PE ratio turned upside down: the profit a company earns per year as a percentage of its share price. It lets you compare a stock directly with a bond or a fixed deposit.
Free cash flow yield is the surplus cash a business generates in a year as a percentage of its market cap. It is the earnings yield computed on cash that actually exists.
Dividend yield is the cash dividend paid per share as a percentage of the current share price. It is the only dividend figure worth looking at; the dividend percentage quoted on face value is meaningless.
Start from scratch and build a complete discounted cash flow model for a real Indian company, one concept at a time.
Two-stage DCF model with live sliders, a 5x5 sensitivity grid across WACC and terminal growth, and Excel export.
The ratio of a company's current stock price to its earnings per share. Indicates how much investors are willing to pay for each rupee of earnings.
Compares a stock's market value to its book value. Shows how much investors are paying for the net assets of a company.
The P/E ratio divided by expected earnings growth rate. Adjusts valuation for growth expectations.
The annual dividend payment divided by the stock's current price, expressed as a percentage. Shows income return on investment.
The total value of a company including both equity and debt, minus cash. Represents what it would cost to acquire the entire business.
Enterprise Value divided by EBITDA. A valuation metric that compares total company value to operating earnings.
A multiple comparing firm value to revenue. Used when earnings are negative or temporarily depressed, since revenue is harder to manipulate than profit.
Free cash flow per share divided by the share price, or firm-level free cash flow divided by market cap. It shows the cash return the business generates on its current price.
The inverse of the P/E ratio: earnings per share divided by price. It expresses valuation as a percentage return, making stocks directly comparable with bond yields.
The share of net profit paid out as dividends. The remainder, the retention ratio, is reinvested in the business.
The value of all cash flows beyond the explicit forecast period in a DCF, usually estimated with the Gordon growth formula. It typically accounts for the majority of a DCF's total value.
The gap between a stock's estimated intrinsic value and its market price. Buying below intrinsic value creates a cushion against errors in the estimate.
Shareholders' equity divided by the number of shares outstanding. It is the accounting net worth attributable to each share.
Related topics: DCF, Relative Valuation, Cost of Capital, Financial Statements, Cash Flow, Earnings Quality, Red Flags, Ratios
