Episode Details

Description: Support session to accompany chapter 10 of the updated version of the Little Book of Valuation, published in March 2024.
Publisher: John Wiley
Amazon link: https://www.amazon.com/Little-Book-Valuation-Company-Profits/dp/1394244401
My webpage for the book: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook2ed.htm

In this session, I look at financial service companies and why they need different treatment from their non-financial counterparts. Starting with the recognition that debt is more raw material than a source of capital to financial service firms, I also look at why estimating cash flows has always been a challenge, leading many to stay with the dividend discount model. Using Citigroup in 2023, shortly after the SVB fiasco, as an example, I contrast a dividend discount model value for the bank with a model where I estimate free cash flows to equity.
Citigroup valuation: https://pages.stern.nyu.edu/~adamodar/pc/littlebook2/CitiVal2023.xlsx

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