Episode Details

Session Description: In this session, I start by contrasting valuation, where we attach a number to an asset, based upon its cashflows, growth and risk, and pricing, where we decide how much to pay, based on what other investors are paying for similar assets. In the context of intrinsic valuation, I look at the drivers of value and then examine why the importance of the drivers can change as companies move through the life cycle, and in the context of pricing, I examine why pricing metrics and peer groups can shift across the life cycle.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/CLC/slides/Ch9.pdf
Exercise:
a.     Estimate the historical values for revenue growth, margins and reinvestment (sales to capital) for each of your firms.
b.     Estimate at least three pricing multiples for each of your firms, with a mix of equity and enterprise value ratios.
c.     Find peer group companies for each of your firms, with median (and average) values for the pricing multiples of your choice.

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