Navigate equity investments and asset valuation with confidence Equity Asset Valuation, Fourth 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.

Navigate equity investments and asset valuation with confidence

"Equity Asset Valuation helps bridge the gap between financial theory and practice, providing an objective view of the complementary and competing theories of, and approaches to, valuation. The authors explain and demonstrate the key absolute and relative valuation methods that are important to both the analyst valuing a company and the student of finance seeking to master valuation techniques. The book's many examples involving actual companies help the reader better appreciate nuances in the application of different valuation methods. This book is an excellent primer on the art of valuation."
Pamela Peterson Drake, PhD, CFA, Chandler/Universal Eminent Professor of Finance, James Madison University

"Valuation is a bridge between stories and numbers. Equity Asset Valuation provides the tools and basic techniques that you need to master to be able to build that bridge, and it does so without intimidating jargon, unnecessary theory, and unwanted distractions."
Aswath Damodaran, Professor of Finance, Stern School of Business, New York University

"In order to succeed as a security analyst it is critically important to have a thorough understanding of the basic fundamental underpinnings of valuation. Equity Asset Valuation provides this in a clear methodical fashion."
Paul D. Sonkin, Portfolio Manager, Gabelli Asset Management, and Adjunct Professor, Columbia Business School

Zusammenfassung

Navigate equity investments and asset valuation with confidence Equity Asset Valuation, Fourth 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.

Inhalt

Preface xiii

Acknowledgments xv

About the CFA Investment Series xvii

Chapter 1 Overview of Equity Securities 1

Learning Outcomes 1

1. Introduction 1

2. Equity Securities in Global Financial Markets 2

3. Types and Characteristics of Equity Securities 8

3.1. Common Shares 9

3.2. Preference Shares 11

4. Private versus Public Equity Securities 13

5. Investing in Non-Domestic Equity Securities 15

5.1. Direct Investing 17

5.2. Depository Receipts 17

6. Risk and Return Characteristics of Equity Securities 21

6.1. Return Characteristics of Equity Securities 21

6.2. Risk of Equity Securities 22

7. Equity Securities and Company Value 23

7.1. Accounting Return on Equity 24

7.2. The Cost of Equity and Investors' Required Rates of Return 28

8. Summary 29

References 31

Practice Problems 31

Chapter 2 Introduction to Industry and Company Analysis 35

Learning Outcomes 35

1. Introduction 36

2. Uses of Industry Analysis 36

3. Approaches to Identifying Similar Companies 37

3.1. Products and/or Services Supplied 37

3.2. Business-Cycle Sensitivities 38

3.3. Statistical Similarities 39

4. Industry Classification Systems 40

4.1. Commercial Industry Classification Systems 40

4.2. Governmental Industry Classification Systems 44

4.3. Strengths and Weaknesses of Current Systems 45

4.4. Constructing a Peer Group 46

5. Describing and Analyzing an Industry 50

5.1. Principles of Strategic Analysis 52

5.2. External Influences on Industry Growth, Profitability, and Risk 70

6. Company Analysis 77

6.1. Elements That Should Be Covered in a Company Analysis 77

6.2. Spreadsheet Modeling 80

7. Summary 81

References 84

Practice Problems 84

Chapter 3 Equity Valuation: Concepts and Basic Tools 89

Learning Outcomes 89

1. Introduction 90

2. Estimated Value and Market Price 90

3. Major Categories of Equity Valuation Models 92

4. Present Value Models: The Dividend Discount Model 94

4.1. Dividends: Background for the Dividend Discount Model 94

4.2. The Dividend Discount Model: Description 96

4.3. Preferred Stock Valuation 100

4.4. The Gordon Growth Model 103

4.5. Multistage Dividend Discount Models 108

5. Multiplier Models 112

5.1. Relationships among Price Multiples, Present Value Models, and Fundamentals 112

5.2. The Method of Comparables 116

5.3. Illustration of a Valuation Based on Price Multiples 119

5.4. Enterprise Value 121

6. Asset-Based Valuation 123

7. Summary 127

References 129

Practice Problems 129

Chapter 4 Equity Valuation: Applications and Processes 135

Learning Outcomes 135

1. Introduction 135

2. Value Definitions and Valuation Applications 136

2.1. What is Value? 136

2.2. Applications of Equity Valuation 139

3. The Valuation Process 141

3.1. Understanding the Business 142

3.2. Forecasting Company Performance 152

3.3. Selecting the Appropriate Valuation Model 153

3.4. Converting Forecasts to a Valuation 160

3.5. Applying the Valuation Conclusion: The Analyst's Role and Responsibilities 161

4. Communicating Valuation Results 163

4.1. Contents of a Research Report 163

4.2. Format of a Research Report 165

4.3. Research Reporting Responsibilities 166

5. Summary 168

References 169

Practice Problems 170

Chapter 5 Return Concepts 177

Learning Outcomes 177

1. Introduction 177

2. Return Concepts 178

2.1...