VALUATION 3/19/2014 Dr.Amit Bagga Chartered
Author : natalia-silvester | Published Date : 2025-06-16
Description: VALUATION 3192014 DrAmit Bagga Chartered Accountant Cost Accountantamitbaggausgmailcom 1 Why valuation is Important 3192014 DrAmit Bagga Chartered Accountant Cost Accountantamitbaggausgmailcom 2 Importance of Valuation in
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Transcript:VALUATION 3/19/2014 Dr.Amit Bagga Chartered:
VALUATION 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 1 Why valuation is Important 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 2 Importance of Valuation in Merger and acquisition 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 3 INTRINSIC VALUE Basic premise is Market generally doesn't value stocks fairly (mismatch between intrinsic value and market price) • Objective of Valuation is to estimate the real or intrinsic value of the company’s stock 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 4 SEARCH FOR INTRINSIC VALUE DISCOUNTING CASH FLOWS • PRESENT VALUE OF DIVIDENDS • PRESENT VALUE OF FREE CASHFLOW TO EQUITY • PRESENT VALUE OF FREE OPERATING CASH FLOW OF THE FIRM 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 5 IV & MARKET PRICE • Market Price – Consensus value of all potential traders • Trading Signal – IV > MP Buy – IV < MP Sell or Short Sell – IV = MP Hold or Fairly Priced 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 6 Importance of valuation(contd.) 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 7 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 8 VALUATION MODELS • ASSET BASED • DISCOUNTED CASH FLOW BASED • RELATIVE VALUATION • NEWER APPROACHES 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 9 VARIOUS MODELS 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 10 Understand Various Types of Equity Valuation Models Fundamental Stock Analysis: Models of Equity Valuation Basic Types of Models 1. Balance Sheet Models Book Value Liquidation Value Replacement Value 2. Discounting Models Free Cash Flow to the Firm (FCFF) Free Cash Flow to Equity (FCFE) 3. Dividend Discount Models 4. Price/Earning Ratios 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 11 Balance Sheet Models Balance sheet models assume that the intrinsic value of the firm is the value of its assets. What is the value of the firms assets? Is it the value on the books? Is it the value we could really get for the assets (liquidation value)? Is it the value we could get to replace the assets? 3/19/2014 Dr.Amit Bagga Chartered Accountant, Cost Accountant,amitbaggaus@gmail.com 12 Balance Sheet Models (continued) Book Value (per share) Look at the book value: Equity / shares outstanding Example: Ford Assets 243,283 million Liabilities 219,736 “ Owners Equity 23,547 “ Shares Outstanding 1,169 “ What is the Book Value per share? Rs23,547/1,169 = Book value of Rs20.14 per share Logic: the value of the assets should be equal to
