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Equity valuation using present value and multiple-based models

Equity investments / equities · Lesson 5 of 5

Lesson 5 of 5

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Lesson 5 of 5 · Equity investments / equities

Equity valuation using present value and multiple-based models

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Apply present value models to estimate the intrinsic value of equity securities, including dividend discount models and free-cash-flow-based approaches using assumptions consistent with firm growth and payout characteristics.
Calculate value using single-stage, two-stage, and multistage dividend discount models, and determine justified price multiples implied by payout, growth, required return, and profitability relationships.

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Calculate and interpret market-based valuation multiples, including price-to-earnings, price-to-book, price-to-sales, enterprise value multiples, and justified leading and trailing multiples.

Compare present value models and multiple-based models, identify the strengths and limitations of each, and select the most appropriate approach given company characteristics, data availability, and market context.

Evaluate the sensitivity of equity value estimates to assumptions about growth, margins, payout, discount rates, and terminal value, and interpret the resulting valuation conclusions.

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