Valuation

With basics in mind from Valuation Post 6 : Drivers of Business valuation Basic Framework Part 1  let’s shift our attention to the key drivers of business valuation. Let's imagine a business in which there is no leverage and no non-operating income/non-operating asset. Hence, ROE=ROCE=ROIC. Note: For detailed thread on ROEVs ROCE Vs ROIC Vs ROIIC click here Now, Let us combine the above framework & help you with derivation of valuation framework. Let's assume the reinvestment

As per our last post in Valuation Series (Valuation Post 7: Drivers of Business valuation Basic Framework Part 2)  we understood that ROIC, Reinvestment rate, Cost of Capital, Growth rate, and length of growth period as some of the key drivers of Valuation multiples. In this post we will break some of the assumptions of the basic framework and create various scenarios to understand which situation leads to a fundamentally higher Multiples like P/E or P/B. You might have alway

Before we go deep into the drivers of valuations we have dedicated this blog post on some formulas which explains the interlinkages between few critical financial metrics & valuations of a company. The Formula for growth in earnings is   EPS Growth = Retention Ratio * Return on Equity. This is a PAT level growth formula and this also includes Non-operating/ Non core income. To understand how this formula leads to correct interpretation of growth please see below table.  An im

What’s common between shows on Indian television, Equity Markets and a prominent investor Chamath Palihapitiya who for the very good part of the year in 2020 and 2021 claimed that he is better than Warren Buffet! The common element is the surprising and unexpected turn of events twisting the complete plot of the story. Remember the three-time dialogues in Ekta Kapoor serials “Kya, Kya, Kya?” Just when you are extremely sure, even more than god, about the future, the reverse h