Valuation Techniques Discounted Cash Flow, Earnings Quality, Measures of Value Added, and Real Options

Jason Voss, CFA, is a content director at CFA Institute, where he focuses on fixed income, behavioral finance, corporate finance, and quantitative methods. He is the author of The Intuitive Investor, and he also ran a successful blog titled What My Intuition Tells Me Now. Previously, he was a portfolio manager at Davis Selected Advisers, L.P., where he built an impressive track record co-managing the Davis Appreciation and Income Fund. Mr. Voss earned a BA in economics and an MBA in finance and accounting from the University of Colorado.

Foreword

Introduction

Part I: Valuation Perspectives: Then and Now

Chapter 1 Two Illustrative Approaches to Formula Valuations of Common Stocks (Benjamin Graham)

Reprinted from the Financial Analysts Journal (November 1957):11–15.

Chapter 2 Seeking a Margin of Safety and Valuation (Matthew B. McLennan, CFA)

Reprinted from CFA Institute Conference Proceedings Quarterly (June 2011):27–34.

Part II: Valuation Methodologies

Chapter 3 Company Performance and Measures of Value Added (Pamela P. Peterson, CFA and David R. Peterson)

Reprinted from the Research Foundation of CFA Institute (December 1996).

Chapter 4 The Affordable Dividend Approach to Equity Valuation Alfred Rappaport

Reprinted from the Financial Analysts Journal (July/August 1986):52–58.

Chapter 5 Discounted-Cash-Flow Approach to Valuation (Gregory A. Gilbert, CFA)

Reprinted from ICFA Continuing Education Series (1990):23–30.

Chapter 6 Equity Securities Analysis Case Study: Merck & Company (Randall S. Billingsley, CFA)

Reprinted from AIMR Conference Proceedings: Equity Securities Analysis and Evaluation (December 1993):63–95.

Chapter 7 Traditional Equity Valuation Methods (Thomas A. Martin, Jr., CFA.)

Reprinted from AIMR Conference Proceedings (May 1998):21–35.

Chapter 8 A Simple Valuation Model and Growth Expectations (Morris G. Danielson)

Reprinted from the Financial Analysts Journal (May/June 1998):50–57.

Chapter 9 Franchise Valuation under Q-Type Competition (Martin L. Leibowitz)

Reprinted from the Financial Analysts Journal (November/December 1998):62–74.

Chapter 10  Value Enhancement and Cash-Driven Valuation Models (Aswath Damodaran)

Reprinted from AIMR Conference Proceedings: Practical Issues in Equity Analysis (February 2000):4–17.

Chapter 11 FEVA: A Financial and Economic Approach to Valuation (Xavier Adserà and Pere Viñolas)

Reprinted from the Financial Analysts Journal (March/April 2003):80–87.

Chapter 12 Choosing the Right Valuation Approach (Charles M.C. Lee)

Reprinted from AIMR Conference Proceedings: Equity Valuation in a Global Context (April 2003):4–14.

Chapter 13 Choosing the Right Valuation Approach (Robert Parrino, CFA)

Reprinted from CFA Institute Conference Proceedings: Analyzing, Researching, and Valuing Equity Investments (June 2005):15–28.

Chapter 14 Valuing Illiquid Common Stock (Edward A. Dyl and George J. Jiang)

Reprinted from the Financial Analysts Journal (July/August 2008):40–47.

Part III: Earnings and Cash Flow Analysis

Chapter15 Earnings, Measurement, Disclosure, and the Impact on Equity Valuation (D. Eric Hirst and Patrick E. Hopkins)

Reprinted from the Research Foundation of CFA Institute (August 2000).

Chapter 16 Cash Flow Analysis and Equity Valuation (James A. Ohlson)

Reprinted from AIMR Conference Proceedings: Equity Research and Valuation Techniques (May 1998):36–43.

Chapter 17 Accounting Valuation: Is Earnings Quality an Issue? (Bradford Cornell and Wayne R. Landsman)

Reprinted from the Financial Analysts Journal (November/December 2003):20–28.

Chapter 18 Earnings Quality Analysis and Equity Valuation (Richard G. Sloan)

Reprinted from CFA Institute Conference Proceedings Quarterly (September 2006):52–60.

Chapter 19 Is Cash Flow King in Valuations? (Jing Liu, Doron Nissim, and Jacob Thomas)

Reprinted from the Financial Analysts Journal (March/April 2007):56–68.

Part IV: Option Valuation

Chapter 20 Employee Stock Options and Equity Valuation (Mark Lang)

Reprinted from the Research Foundation of CFA Institute (July 2004).

Chapter 21 Employee Stock Option Valuation with an Early Exercise Boundary (Neil Brisley and Chris K. Anderson)

Reprinted from the Financial Analysts Journal (September/October 2008):88–100.

Part V: Real Option Valuation

Chapter 22 Real Options and Investment Valuation (Don M. Chance, CFA and Pamela P. Peterson, CFA)

Reprinted from the Research Foundation of CFA Institute (July 2002).

Chapter 23 Real-Options Valuation for a Biotechnology Company (David Kellogg and John M. Charnes)

Reprinted from the Financial Analysts Journal (May/June 2000):76–84.

List of Contributors

Index

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