What are Valuation Multiples? Valuation Multiples are ratios that you can use to determine how much a company or is worth. The main valuation multiples are EV/Sales, EV/EBITDA, and P/E.
What are Valuation Methods? Valuation Methods are ways to determine how much an asset is truly worth. There are 3 main valuation methods to determine how much a company or a stock is worth.
What is Unlevered Free Cash Flow? Unlevered Free Cash Flow (UFCF) is the cash flow a business generates that can be given to all investors. Both debt and equity investors.
What is Terminal Value? Terminal Value is the future value of a company at the end of our forecast period.
What is Terminal Multiple Method? Terminal Multiple Method is a way to calculate Terminal Value assuming the business sells itself to a buyer.
What is Risk-Free Rate? Risk-Free Rate is the rate of return on an investment with zero risk.
What is Present Value? Present Value is the value of an asset today. It represents what an asset is worth “at present”. Therefore, it’s called “Present Value”. Present Value is commonly used in DCF analysis to describe what a future amount of money is worth…
What is Perpetuity Growth Method? Perpetuity Growth Method is a way to calculate Terminal Value assuming the business will generate cash flow at a steady growth rate forever into the future.
What is Mid-Year Convention? Mid-Year Convention is the practice of discounting future cash flow assuming receipt of cash flow evenly throughout the year. Mid-Year Convention is used in DCF analysis to better reflect the timing of cash flow.
What is Market Capitalization? Market Capitalization (Market Cap) is the value of the company entitled to the shareholders based on the market price. Shareholders are the owners of the company. Therefore, Market Capitalization represents the total value that belong to the company owners. Market Cap…
What is Margin of Safety? Margin of Safety is the cushion investors get on investments against potential risks. This cushion represents the extent to which negative events can damage the intrinsic value without compromising investors’ required investment returns.
What is Levered Free Cash Flow? Conceptually, Levered Free Cash Flow (LFCF) is the cash flow generated in a period that is free to be given to shareholders. It’s the amount of cash flow leftover after paying for all expenses (including interest) and investing activities….
What is Intrinsic Value? Intrinsic Value is the true value of a company or stock based on the amount of cash it can generate.
What is Internal Rate of Return? Internal Rate of Return (IRR) is the annualized rate of return based on when cash is received or paid.
In this article, we’re going to walk through how to value a company.
Let’s Define the Intrinsic Value of a Stock [To Come]