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Reddit reviews on Valuation: Measuring and Managing the Value of Companies, 5th Edition

Sentiment score: 10
Reddit mentions: 15

We found 15 Reddit mentions of Valuation: Measuring and Managing the Value of Companies, 5th Edition. Here are the top ones.

Found 15 comments on Valuation: Measuring and Managing the Value of Companies, 5th Edition:

u/cb_hanson_III · 8 pointsr/investing

Forget Shkreli. The usual sources (besides in-house proprietary models) are:

(1) Macabacus. (see http://macabacus.com/learn).

(2) Rosenbaum and Pearl, Investment Banking - book and excel models

A bit more academic, but more in-depth:

(3) Penman's Financial Statement Analysis and Security Valuation (excellent book and he has a running example that guides you to create your own valuation spreadsheet)

(4) Dan Gode and Jim Ohlson models These guys are genuine experts from the academic side.

(5) Damodaran, as others have mentioned.

(6) McKinsey, Valuation. Some people like this one.

(7) Fernandez, Company Valuation Methods and Common Errors. Something of an acquired taste, but might be worth the read since he provides a list of the most common valuation errors. Gives analysts an awareness of how they can f**k up which can be useful.

u/ttg314 · 5 pointsr/finance

> whoaa why has my tutor been telling me to discount each expense per year then add them up then discount the total!

Fire your tutor, lol. That makes no sense. You come up with the FCF first then discount it. I mean, I guess you can do it his way but it's stupid. In a real model your going to have so many inputs you would need to discount. Read Valuation. Then you'll actually know why it works that way and it'll be much easier. It's a pretty big book so for this topic so you'll only need to read up to Chapter 6.

Tip: Read the whole thing. It'll do you good.

u/Sonkidd · 3 pointsr/finance

I would read "a random walk down wall street" for a good understanding of basic theories behind investing (fundamental analysis vs technical, risk and portfolio management etc...).

Then diving into to the different schools of analysis, for fundamental analysis, I super highly recommend reading: McKinseys Book on Valuation ( http://www.amazon.com/Valuation-Measuring-Managing-Companies-Edition/dp/0470424656), you might need a quick primer on accounting and corporate accounting before jumping into that book though. Warren Buffet's Essays and books and the classic "The intelligent investor" are also good resources for insights.

For portfolio management, I would study basic modern portfolio theories
( http://en.m.wikipedia.org/wiki/Modern_portfolio_theory), and read books on portfolio management such as http://www.amazon.com/Pioneering-Portfolio-Management-Unconventional-Institutional/dp/0684864436.

But then to go even further, it will be more robust to read more about risk management and the shortfalls of such portfolio management models highlighted in the recent market crashes. "The Black Swan", "Fooled by Randomness", "Irrational Exuberance" are good books to read to more qualitatively understand risk and learn to protect yourself from it.

u/claremontboy · 3 pointsr/investing

For $50 and a couple of dozen hours spent reading, you'll get an entire MBA's valuation education by reading Valuation: Measuring and Managing the Value of Companies from McKinsey.

u/bananajr6000 · 3 pointsr/smallbusiness

Valuation is like voodoo. According to the IRS, the fair market value is the most important, but in reality there are lots of factors. For example, what would the business sell for today if the owners agreed to stay on as regular full-time employees - That value might be zero if their cash flow is poor, but clearly the business is worth something (and they are not going to just give away equity based on poor income valuation)

http://en.wikipedia.org/wiki/Business_valuation

This Forbes article does a fair summation of the issues you are dealing with:

http://www.forbes.com/2009/09/23/small-business-valuation-entrepreneurs-finance-zwilling.html

I would probably start with asset and income valuation and then try to put a number on the existing owner non-asset goodwill defined as:

http://en.wikipedia.org/wiki/Goodwill_(accounting)

I would avoid, "valuation based on what the founders have already put in, i.e. a % of their day-job salaries and cash." Those are sunk costs. What I mean by that can be explained by analogy: Would you pay someone $30,000 for a rusted-out, broken down 1988 Ford Ranger because the owner put $22,000 of improvements into it over its lifetime?

The owners may feel it's worth $30,000 because of their efforts, but as I often think when I am browsing Craigslist and run across an extremely overpriced vehicle, "If there's not a couple gold bars that go along with it, I'm not paying that." The reality is that the owners are going to tend to over-value the company because of sunk costs, but you have to come to a valuation based on the current realities (future earning projections can be taken into account as well, but I would be conservative in those estimates.)

There are accountants who specialize in business valuation. I would definitely retain one to work for you and not for the company. Look for someone who is a CPA and a Certified Business Analyst or Certified Valuation Analyst or American Society of Appraisers member.

There is a book that was recommended to me (I haven't read it yet) called Valuation.

http://www.amazon.com/Valuation-Measuring-Managing-Companies-Edition/dp/0470424656/ref=cm_cr_pr_product_top

There is also a workbook:

http://www.amazon.com/Valuation-Workbook-Step---Step-Exercises/dp/0470424648/ref=sr_1_5?ie=UTF8&qid=1395756019&sr=8-5&keywords=valuation+measuring+and+managing+the+value+of+companies

Again, I haven't gotten around to these yet. I did notice that the first review of Valuation has a recommendation for a book: Business Valuation which that reviewer says is the best for reviewing small, private companies. The review:

http://www.amazon.com/Valuation-Measuring-Managing-Companies-Edition/product-reviews/0470424656/ref=sr_1_1_cm_cr_acr_txt?ie=UTF8&showViewpoints=1

The book:

http://www.amazon.com/gp/product/047037148X/ref=cm_cr_asin_lnk

Good Luck!

u/wspnut · 2 pointsr/incremental_games

Not in way of argument, but it's very important that the ideators of the world understand the difference between ideation and investment.

Bill Gates is well known for giving start-ups the cash

There are investors out there that throw money at ideas purely based on the idea, and nothing else. But these are the exact type of people that are being mocked in this thread - I haven't met one, myself, after many years in the field. In truth, the amount of diligence that goes behind anything beyond simple market investment is tremendous. I would argue doing research on angel investment is a sticky path. If anyone with an idea who has dreams of starting a company really wants to find that dream investor, I recommend starting with one of these books on how acquisitions work. Then work your way to understanding early-class investment. At the end of the day, they're tremendously easier to understand, and give you a better learning curve into the grit that goes into determining which - of thousands of ideas - to invest in, and which not to. There are literally thousands, if not orders of magnitude more, ideas currently being tossed around to earn money. Investors, like Bill Gates, who want to turn their money into more money, do (or pay people to do) the grit work to ensure they pick the right ones.

In this way - developers are an investor. They invest time, not money, but in essence it's exactly the same, because they could easily spend that time working on a better investment.

Books:

u/MarcusAurelius13 · 2 pointsr/investing

Learning to fill in one of these spreadsheets is pretty meaningless. There are so many adjustments to make in a DCF depending on each company and/or industry you should try to start from the bottom up. If you're a beginner and really want to learn how to do a full DCF I'd recommend getting one of the below books to start learning from scratch.

http://www.amazon.co.uk/Valuation-Measuring-Managing-Companies-Finance/dp/0470424656

or

http://www.amazon.co.uk/Investment-Valuation-Techniques-Determining-Finance/dp/1118130731

u/to_change · 2 pointsr/SecurityAnalysis

Hello everyone!

I'm reading through the McKinsey "Valuation" (5th Edition) textbook (https://www.amazon.com/Valuation-Measuring-Managing-Value-Companies/dp/0470424656) and I've had some issues that I was hoping to get answered.

Specifically, in the second chapter, the authors discuss the so called value driver formula: Value =( NOPLAT_i * (1 - g/ROIC) )/WACC-g. Where:

g = constant growth rate of earnings.

ROIC = rate of return on incremental capital invested

NOPLAT_i is the operating profit after tax (before reinvestment) in period 1.

However, then they go on to show this diagram: https://imgur.com/R7umPno, which is a matrix depicting the value of companies for different ROIC, growth rate combination. I understand the *point* of this: when ROIC < WACC, growth destroys value, and vice versa. However, I'm having trouble replicating the specifics of the numbers they get:

In this situation, WACC = 9%, and the initial NOPLAT is $100. They model it for 15 years and then use 3% perpetuity growth formula for the terminal value. I have 2 questions.

  1. I don't understand how they can say that the value of the company is $1100 when ROIC and growth are both 9%. The value driver formula would clearly give a value of 0 (I know it's only applicable in constant growth settings, but this assumption is met) because g/ROIC would = 1 when g = ROIC, and thus the numerator goes --> 0. This would also make sense because of the other formula they mention: Investment Rate = growth rate / ROIC. If growth rate = ROIC, then IR = 1 and you reinvest everything in order to get the growth you want.
  2. Secondly, I've tried to model these scenarios out on my own in Excel not using any plug in formulas but just literally modeling the scenario out for 15 years with a perpetuity terminal value and I don't get anywhere close to the $1100 present value for the time when ROIC = WACC = 9%. The value ($1111.11) is only close for ROIC - 9%, Growth - 3% Anyone want to take a crack at it to help a guy out? Happy to share my spreadsheet

    Either way, I feel like I'm missing something really obvious. Help is appreciated :)
u/skatastrophy · 2 pointsr/investing

This is a complex subject. Here are a couple of books, though you might not need the 2nd one (I'm not sure what's involved in an education in Economics).

Valuation

How to Read a Financial Report

PDF Warning - The Investment Checklist

u/LemonsForLimeaid · 2 pointsr/finance

Is this the same one just newer? Would you recommend?

u/SPh0enix · 1 pointr/finance

While it is but a part in the M&A process, the book "Valuation: Measuring and Managing the Value of Companies" by McKinsey is one of the bibles on Valuation.

Amazon link.