This was a great book. As of now it is the best Finance book I have ever read. It is an essential reference for learning the basics of how to value stocks and their underlying firms. Sometimes in Finance classes they just give you formulas or superficial information on how to solve problems without telling you how to create a meaningful model to help you in the real world. This book paints a picture and a process for how to approach valuation.
The writing is easy to follow and the examples are rich with details yet they are also understandable and not muddled down with confusing wording or semantics. He always keeps the big picture of what we are trying to accomplish with the valuation in mind and does an amazing job of seemlessly connecting different concepts from different parts of the chapter.
With his examples Damadoran takes complex information and ideas and transforms them into simple and meaningful models and equations that are intuitive and easy to follow. I used the book to create valuation models for the cases in my class and the models were accurate and offered insight into how to value companies in the real world.
The examples are way better than the typical textbook with the chapter and end of chapter problems pattern that so many textbooks use.
The book opened my mind to how valuation of companies is accomplished. I am a huge fan of Damadoran now. I strongly recommend this book!
Damodaran is widely known in the academic/financial arena. The second edition clears up many hiccups in the first edition. There are other books out there that will provide you with most of the information in this book, but not with as much detail and explanation. Also, this book is written very well. It does a great job of keeping the student's interest and not sounding too dry (most of the time). I bought this for one finance class, and have used it as a supplement in nearly all other finance classes. Every finance professor I have asked about Damodaran speaks very highly of him. Although this book material/methodology sticks primarily to the academic world, it still provides the reader with the real-world content and thorough understanding that will be needed in the business world. If you want a truly detailed yet practical analysis of valuation, then this is the book for you.
I saw the author speak at a conference which prompted me to buy the book. His presentation and book nicely merge theory with practice -- too many valuation books are academic and don't deal with the real-life problems. He seems to anticipate the types of real-life challenges you'll get and then tells you how to handle them (about half the book addresses these "loose ends" that aren't always covered in more basic valuation material). I especially like that he's embraced valuation methods beyond DCF (such as P/E and P/B) because purists tend to dismiss these other methods as too crude for serious consideration(in his book he acknowledges that only 10% of Wall Street valuations are done with DCF). His web site is great for practitioners because you can download the raw numbers for thousands of companies and do the valuation steps he highlights in the book.
The book is mainly aimed at valuation practitioners and MBA sudents. The book deals with 3 valuation techniques- DCF, relative valuation (based on PE, P/BV, PS multiples) and contingent claims (options). Great insights into determining key variables (PE, PS, P/BV) based on business fundamentals and pro and cons of using each approach. However, the book does not go into enough depth in CAPM and APT. The author assumes that the reader would have a fair idea about financial ratios, fundamentals etc. The best part of the book deals with valuation of special cases like cyclical firms, brands etc. and how corporate restructuring affects value. It also provides great insights into valuation for takeovers and mergers. The author provides a usable framework for valuing intangibles in an acquisition target- what the different sources of synergy are and how to value each in a lucid framework. Overall, a good book to gain a firm footing in investment valuation techniques.
This is an excellent book. It serves as both a course in valuation as well as a useful reference tool.
The book is heavily weighted to discounted cash flow analysis, though it also discusses relative valuation (like P/E multipliers) and contingent claims.
Clearly written the book presents in detail simple to complex DCF based models (dividend discount model, free cashflow to equity and free cashflow to the firm). This range of models deal with the complex valuation problem of variable growth. After presenting a model, its limitations and best uses are explained.
He then shows how these models can be used to derive P/E, P/S, and P/BV ratios from fundamentals.
Abundant examples are used to make the material clear.
The book also discusses special situations, e.g., cyclical firms, and distressed firms to mention just a few.
At first glance this book might be mistaken for a "cook book". Lots of formulas and detailed examples of how to work them.
But there is more. And this is where the real "meat" of the book is - underpinning the seeming forest of details and examples - is a valuation logic and philosophy.
If you read this book carefully, you will develop an appreciation for the impact certain fundamentals have on valuation and how they interact with one another. This is much more important than memorizing the formulae in the book.
Also there is some very useful and frank discussion of shortcomings in some of the tools used, including the CAPM and a warning about being seduced into believing that the DCF approach results in certainty.
Valuation involves estimates and formulas (or multiples) are simplifications of very complex real world dynamics. In the businss world, valuation is typically a process of estimating ranges of values for each of several methods chosen (e.g., DCF, market comparables, precedent transacions, replacement value, etc). The resulting matrix of values is then compared (in effect cross checked) to come up with a range of possible values. And here the differences between buyer and seller affect the outcome - different assumptions re the DCF or the cashflow and synergies that can be achieved - come into play to create two different matrices of values - from which the two parties then negotiate the actual price.
The book and its author are well regarded. This particular volume is used in AIMR's CFA study program - which is a measure of its worth.
This book provides a good introduction for those who want to learn valuation. Explained in simple English, the book describes many tools on how to do the valuation, particularly for stock valuation (DCF, P/E ratio, etc.).
I particularly like the explanation of various models of DCF. The author clearly explains the strengths and weaknesses of each models, possible problems and the solutions to the problems.
However, I found that this book lacks more in-depth analysis of the topics covered. Furthermore, I found that the CAPM model, to some extent, does not truly exist in the real corporate world. I have read many valuation reports from big names in investment banking, many of them do not adopt CAPM (for various reasons that make CAPM unapplicable, which are also inherent weaknesses of CAPM, they just put x% as the discount rate). Only few who still stick to CAPM. There should be a bridge between academic and real world applications. A more detailed discussion on CAPM by the author would resolve this issue.
Product Details :
Hardcover: 696 pages
Publisher: Wiley; 2 edition (August 4, 2006)
Language: English
ISBN-10: 0471751219
ISBN-13: 978-0471751212
Product Dimensions: 7.4 x 1.5 x 10.4 inches
More Details about Damodaran on Valuation: Security Analysis for Investment and Corporate Finance 2nd edition
or
Download Damodaran on Valuation: Security Analysis for Investment and Corporate Finance 2nd edition PDF Ebook
No comments:
Post a Comment