"Aswath Damodaran's work is always worth reading.... For investors and students of the financial markets who want to embark on serious fundamental analysis, it is critical to understand how to go about valuing stocks and other instruments. There is no short cut.... Damodaran's Investment Valuation explains the hard work part." (Seeking Alpha, May 2012)
I've used this book as a supplement to the materials provided in my Financial Statements Analysis and Valuation class. From the perspective of a grad student (MBA) with a non-financial background, this is a very well organized and well-written book. There is a very clear and logical progression from basic to [more] advanced concepts; it makes material very easy to follow.
Many of the numbers have been updated since the 2nd edition of this book was published some 10 years ago. That is, many charts and tables have data going through as late as 2011 (although some still use old data). To be fair, it is very hard to find really good examples of things, so I don't really blame him for not updating some of the examples. Most of the topics though are still pretty much the same as the 2nd edition (this is also to be expected), but, in some instances, the discussion is updated to cover recent events.
Overall, this is still an excellent valuation book. Especially for someone that has not read the 2nd edition, this is an excellent resource. I would describe Damodaran's writing style as "honest," which means that he gives you both the good and the bad. He acknowledges that valuation is inherently a subjective process, which, in my opinion, can only be really done well with experience. I find this book as kind of a road map to good valuation fundamentals, as Damodaran shows you what alternatives you can do and what things to avoid.
Good work, if only it was reliable... In a discipline where accuracy is so important, I am amazed it has been selling so well for so long. The book has plenty of formulae mistakes that make its reading and comprehension really difficult and painfully time-consuming as you need to go through correcting all those errors and read the chapters again and again. Still, even after such an arduous work, you end up not being 100% sure that what you have learnt is correct. Wiley should long ago have retired this edition from circulation and then market a new, thoroughly corrected one. Of course, those (many) unlucky readers who have bought this terrible (paperback) edition should receive a new one for free as soon as it is available. I feel I have been cheated!
In his book, Aswath Damodaran sets out to explain how assets (both real and financial) are valued using for means to aid the reader in his or her understanding:
1. To cover the different approaches that can be taken to value assets
2. To provide a framework to decide which approach is most appropriate for valuing a particular asset
3. To provide examples of how particular assets are valued
4. To make each approach self-contained, although not entirely independent of one another
One the whole, the author succeeds in his attempt to demonstrate how someone can approach asset valuation. For the most part the author approaches the valuation process from the foundation of determining the present value of all future cash flows from an asset. It is the sum of the present values of the expected future cash flows that determines the asset's worth.
While the author successfully applies the principles of asset valuation in the book, a number of shortcomings make this book less than ideal for use in a course on security analysis. After introducing the reader to the approaches he plans to cover in the book, the author launches into a discussion of the relationship between the risks of owning an asset and the returns expected from the asset in chapter 3. This chapter includes an explanation of the Capital Asset Pricing Model, one of the foundations of modern finance theory. Such a rapid exposure to modern finance may leave readers wondering if they are in over their heads. Normally, such discussions are left for a later chapter after a discussion of financial statements and ratio analysis.
Furthermore, the author tackles the estimation of discount rates without first providing us with a discussion of the financial instruments that are sold in the marketplace whose costs of financing typically compose the discount rate.
Still, the book is worthwhile to read for those who are already familiar with the concepts of finance and the time value of money and who want to learn more about how assets are valued. The book also can be used in an upper-level finance class devoted to asset valuation.
This book is/was required for the CFA program.
Those requirers were required to print pages of errata.
Many essential formulas are simply wrong, presumably from sloppiness. Reading the book is a lot like correcting a high schooler's homework.
All this courtesy of an organization that publishes its own performance presentation standards and generally, high-handedly nitpicks.
Apologies to Mr Damodaran, further to my last 'scathing' review, I have since discovered that Mr Damodaran has conveniently posted the entire Solutions manual to this book on his website.
Unfortunately this book has been selected as one of our reading materials for a certain examination I am currently studying for. The worked examples in the book are not always clear which is fair enough, as it is not the first such book. Normally this problem is ironed out by working thru the set problems at the back of each chapter. What is very DISAPPOINTING about this text is that it is the only one in our entire syllabus of reading materials that does not have a Solutions Manual to help with our studying. Mr Damodaran has not bothered making the effort to produce one it seems.
This is an excellent book in valuing assets. As a financial analyst, I highly recommend this book to students and analysts, although some parts of the book, especially these relating to real options are somewhat oversimplified. Nevertheless it is one of the books that everybody who is involved in valuation should have. What is the real contribution of the book to students and profesionals is that it stresses the drawbacks of the mentioned valuation methods. Buy this book, it is "Value for money".
I'm a CEO of a high-growth tech company and former Goldman Sach banker. I've earned a JD and MBA from NYU. I've read countless books on valuation.
I believe that this book offers one of the most flexible approaches to valuing assets that I have yet encountered. Its primary objective is guiding the reader in valuing any asset, from an option on a company that manufactures high-tech drilling equipment to a neighborhood lemonade stand. It is intentionally simple, but simplistic. And that is why it is so valuable.
... This book teaches bare bones valuation... the bread and butter of valuation. Actually, it covers all the topics ...[giving] the same cursory attention that venture capitalist and investment bankers do... that is to say, that they deserve.
One note of caution, you should have a good understanding of discounted cash flow analysis to understant this book. I would recommend Essentials of Investing, which is a text book, but a good one.
This is without doubt the best book on valuation since Graham and Dodd. It thoroughly explains the valuation process from the ground up with simplicity,intuitively and with just the right amount of math.All that one needs to get enchanted by this gifted teacher and writer is commonsense and an understanding of basic school level math.
However, I feel that the chapters on measuring growth as well as relative valuation were a bit skimpy. Dr. Damodaran has excellently covered some of these areas in the working papers available on his website. Together, his website and this book present the most powerful learning source that I have found in this fascinating area.
This book has the potential to be an excellent resource on valuation analysis. It was well written and insightful. However, the typos contained in this book prevent it from reaching its true potential. Too often, formulas contained plus signs where there should have been a minus sign or an "is" should have been an "is not." Although the typos did not ultimately prevent me from understanding the material, I had to work harder than I should have to sort out some of the confusion.
While this is an excellent book on valuing assets using discounted cashflows (DCF), there's scant material dedicated to other valuation methods. Maybe Aswath writes about these subjects in another book, but for completeness at least a chapter or two could've been written about relative valuation, especially considering that most all analysts today use multiples and the like to value stocks.
If you want to learn more about DCF valuation including how to calculate free cash flow for various situations, this is a good book (even considering the errors). If instead you'd like to learn about several different valuation methods, then this book falls short.
As far as I know there is no other book as comprehensive on the tools and techniques for valuing assets. I like in particular the concise illustration of the different DCF. Damodaran added nicely a "trouble shooting guide", which shows possible problems and solutions to the different models. If there is one thing missing, it is the missing of merger valuations.
I have an MBA and work in investment banking and yet I have found Damodaran's book extremely useful. It's simply a great book on valuation that teaches exactly how to value companies by various techniques. Valuation by its very nature is a quantitative exercise. Anyone who thinks they can approach valuation in some non-quantitative fashion is just kidding themself. I highly recommend this book !!!
Having an MBA and having worked in an investment bank, this is the best all around valuation book I've read. The most significant feature of this book is how the ideas are presented. The reader gathers new insights, and is exposed to the nuances of valuation technologies, which usually confuse even the practitioners. His website also contains several discussion points that supplement the well presented text. If you have to choose only one valuation book, this is it. This book rates highly not only because of the excellent coverage but more importantly how the examples and the ideas have been brilliantly crafted into a great learning experience. A great teacher surely shines in how he impart even the mundane ideas of basic valuation. Buy this book for the way he teaches, not only for the topics he discusses.
This book is awful. As an MBA student I thought it would be a good complement to my classes. I was painfully mistaken. This book covers only the most basic valuation models and not even all of them. No mention of APV or Abnormal Earnings models. I strongly discourage anyone who has had even limited exposure to company valuation from buying this book - you will waste your money.
An outstanding book from the high-priest of valuation. Covers all major techniques and applications. However, not all that suitable for beginners or as an introductory text since some of the (slightly advanced) material is presented in a fairly condensed manner. Readers with a little experience in the area or students who have taken at least one finance course and understand the fundamentals of financial economics should find this book extremely useful, though. Great as a reference guide, too.
Product Details :
Hardcover: 992 pages
Publisher: Wiley; 3 edition (April 17, 2012)
Language: English
ISBN-10: 111801152X
ISBN-13: 978-1118011522
Product Dimensions: 7 x 1.6 x 10.2 inches
More Details about Investment Valuation: Tools and Techniques for Determining the Value of Any Asset 3rd edition
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