Performing Your First Company Valuation
Learning Outcomes
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What’s Included
Why and When Are Companies Valued?
Why and When Are Companies Valued?
Valuing companies is a common business activity and a very useful skill for analysts to learn. This introductory lesson explains how and when company valuation is used during the course of business.
The Different Methods of Valuing a Company
The Different Methods of Valuing a Company
Companies can be valued many different ways. In this lesson I'll explain two of the most common methods: income-based valuation and market-based valuation.
Enterprise Value and Equity Value
Enterprise Value and Equity Value
The concept of company valuation is much easier to understand when we distinguish between the Enterprise Value and the Equity Value of a company. In this lesson, I help you to understand and calculate these important values.
The Weighted Average Cost of Capital
The Weighted Average Cost of Capital
Central to income-based valuation is the cost of capital, which represents the required rate of return for an investor. In this lesson, I show you how to calculate the weighted average cost of capital for MarkerCo.
Using the Capital Asset Pricing Model
Using the Capital Asset Pricing Model
To calculate the cost of equity for MarkerCo, we're going to use the Capital Asset Pricing Model (CAPM), a common but not uncontested technique among analysts.
Unlevered Free Cashflow
Unlevered Free Cashflow
Many different types of cashflow exist in a company, from operating cashflows to free cashflow to equity. In this lesson, I'll show you why unlevered free cashflow is a very important cashflow for valuation.
Calculating the Discounted Cashflows
Calculating the Discounted Cashflows
In this lesson, we calculate the weighted average cost of capital (WACC) for MarkerCo and discount the unlevered free cashflows for the next 5 years.
The Perpetuity Method
The Perpetuity Method
The terminal value is a technique used to estimate the discounted cashflows beyond our financial projection period. In this lesson, I show you how to calculate the terminal value using the perpetuity method.
The Exit Multiple Method
The Exit Multiple Method
The exit multiple is a more intuitive way of calculating the terminal value. In this lesson, I show you how to accomplish this using the EV / EBITDA multiple for MarkerCo.
Re-Cap on Equity Value Calculation
Re-Cap on Equity Value Calculation
With Equity Value now calculated, let's pause and review the steps taken in the past 9 lessons to get to our company valuation.
Sensitivity and Scenario Analysis
Sensitivity and Scenario Analysis
All valuations should be subjected to both scenarios and sensitivity analysis. In this lesson, I show you how to accomplish both of these tasks, testing growth rates, exit multiples and WACC.
Market-Based Valuation with Multiples
Market-Based Valuation with Multiples
In this lesson, we use a variety of market multiples to find a valuation range for MarkerCo. The multiples calculate both enterprise value and equity value.
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