Valuation Master Class
VMC: What Is Free Cash Flow to the Firm?
Free cash flow to the firm (FCFF) is the cash flow that a company is ‘free’ to distribute to all providers of money (both, debt and equity) without damaging its growth opportunities.
Read MoreVMC: WACC – Theory versus Reality
Since debt is cheaper than equity, in theory, this would mean that a company would prefer to be fully funded by debt to minimize its cost of capital. However, it’s not the case in reality that a company has a capital structure that is 100% debt.
Read More8 Value Investing Icons
Value investing is the idea that you can achieve superior investment performance through buying stocks at prices that appear to be below the “intrinsic value” of the business. The investor tries to estimate the intrinsic value of a business through a variety of means such as price-to-book, price-to-earnings, tangible assets value, dividend discount value, or free cash flow value.
Read MoreVMC: Increase Your Impact with the Valuation Master Class
When I started my career, I boldly told my boss that I wanted to be voted the number one analyst in Thailand. 14 years after I set that goal, I was finally voted the number one analyst in Thailand!
Read MoreVMC: Increase Your Productivity in Valuation
What a crash! From the number one position at the number one foreign broker to unemployed, all due to a lack of efficiency. I eventually joined another firm at my prior position as a bank analyst. It was the best move I ever made.
Read MoreVMC: Gain Confidence in Forecasting and Valuation
I said, “you are right, I will fix that tonight, but that mistake does not change my buy argument for that stock and the sector overall.” My confidence allowed me to stop his argument and get back to my message.
Read MoreVMC: Learn Practical Skills in Valuation
Most people read textbooks or attend university lectures to understand valuation theory, but the reality is that actual valuation work is very, very different from theory. Many people think “well I’ll just learn valuation on the job.” WRONG.
Read MoreRevenue Growth of All Listed Non-Financial Companies in the World
Chart of the Day: All business starts with revenue. We’ve looked at on average 12,621 non-financial companies. Over the past 23 years, revenue growth has averaged 6%.
Read MorePast Betas Tend to Regress Towards 1.0x
Chart of the Day: Past betas tend to regress towards 1.00x. The beta you use for valuation is to infinity. To avoid mistake we use three betas: High risk: 1.25x, Average risk: 1.00x, low risk: 0.75x.
Read MoreChange in Net Working Capital Is Small, but Volatile
Chart of the Day: Changes in net working capital are volatile because that change results from five separate forecasts. Net working capital is a small but volatile investment item.
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