Earnings Power Value — A Straightforward Intrinsic Value Estimator
Updated 5/1/2024 Among the many valuation methods and models, the earnings power value formula is an undervalued model, no pun intended. It helps us find undervalued companies without as much estimating as the discounted cash flows, for example. Is the earnings power value formula perfect? Unfortunately, it is not. But it is another tool in […]
Sum of the Parts Valuation – When a Company Has Many Business Segments
Valuation is part art, part math, and valuing a company encompasses many moving parts. Suppose we want to value a company and notice several different businesses tied up in the company. How do you value such a company? One of the best ways to value those companies is the sum of the parts valuation. By […]
Cash Flow Statement: The Final Stage of a 3-Part Financial Model
Forecasting the cash flow statement is the final stage in developing a 3-statement financial model in what was a linked and iterative process. The figures on the cash flow statement will in large part be driven by the changes in amounts on the balance sheet as well as certain non-cash income statement items. As we […]
Summary of the John Burr Williams Formula – The Basis of Intrinsic Value
What is the equation for value? Warren Buffett defined it in his 1992 annual shareholder letter. He referenced the formulas in the classic, The Theory of Investment Value by John Burr Williams. This post will present and explain this exact formula published by John Burr Williams and help modernize it in today’s terms. Nobody has […]
Income Statement Forecasting: The First Step of a 3-Part Financial Model
Forecasting the income statement is the first step of a 3-statement financial model and it is the most critical part of any forward-looking financial analysis. The projections made in the income statement will drive various items on the balance sheet and cash flow statements. Forecasting the income statement is key to creating forward looking P/E […]
Balance Sheet Forecasting: An Essential Part of a 3-Part Financial Model
Forecasting the balance sheet is an essential part of any 3-statement financial model as the balance sheet, income statement, and cash flow statement are all integrated and need to flow. While the balance sheet is not as flashy as the income statement to investors, balance sheet projections form a critical role in developing the cash […]
How to Use Enterprise Multiple to Put a Valuation on a Company
Updated 4/4/2024 There are many ways to value a company, including discounted cash flows, dividend discount models, value ratios, price multiples, and more. In today’s post, we will discuss the enterprise multiple, which includes a company’s enterprise value and a different measure of its revenue. Using the enterprise multiple is a reasonably easy way to […]
Example WACC Calculator Calculation with Walmart (WMT)
The attached calculator can be used by investors to estimate the weighted average cost of capital (WACC) for publicly traded companies. For a larger discussion on WACC and some of the various methods that can be used to calculate the cost of equity and cost of debt, readers are encouraged to explore our larger article […]
Weighted Average Cost of Capital Guide (+WACC Calculator Excel Download)
The weighted average cost of capital (WACC) is a cornerstone of any discounted cash flow valuation and a fundamental learning for every investor’s toolbox. This is because the WACC is used as the discount rate, or required rate of return, when doing a present value calculation of a company. WACC can also be used by […]
The H-Model Discovered – CFA Level 2
As a type of Dividend Discount Model (DDM), the H-Model is a valuation tool that has its core methodology based on discounted cash flows, which are approximated here with dividends. The end result is a Net Present Value (NPV) calculation of the future dividends of the company. The H-Model is a popular variation of the […]
