Equity Valuation Models
Knowing a company is good isn't enough — you need to know if the stock is fairly priced. These articles walk through the major valuation frameworks, from discounted cash flow models and comparable company analysis to dividend discount models and residual income approaches, so you can estimate what a stock is actually worth.
Economic Value Added and Value Drivers
How to calculate EVA using NOPAT and invested capital, plus the value driver tree linking operational metrics to shareholder returns
Using Comparable Transactions Data
Learn how to use precedent M&A transactions to value companies, including control premium adjustments, deal-specific factors, and worked examples from the software sector.
Incorporating Options and Warrants into Valuation
Learn how to properly adjust equity valuations for dilution from stock options, warrants, and convertible securities. Master the treasury stock method and understand when full dilution matters.
Valuing Negative Earnings or Early-Stage Companies
How to value unprofitable companies using revenue multiples, unit economics, path-to-profitability analysis, and probability-weighted DCF scenarios
Residual Income and Excess Return Models
Calculate residual income and EVA to measure true economic profit, with worked examples showing when these models beat DCF for non-dividend payers.
Documenting Valuation Assumptions Clearly
Apply CFA Standard V(A) requirements to valuation work with a practical documentation checklist covering sources, rationale, and sensitivity ranges for every key input
Selecting Discount Rates with CAPM and WACC
Calculate cost of equity using CAPM (Rf + Beta × MRP) and blend with cost of debt into WACC, with worked examples and common error fixes
Scenario and Sensitivity Analysis Techniques
How to stress-test valuations using data tables, tornado charts, and scenario modeling for base, bull, and bear cases
Dividend Discount Models for Mature Companies
Apply the Gordon Growth Model, two-stage DDM, and H-model to value dividend-paying stocks, with worked examples showing why r must exceed g.
P/E Multiple Selection: Trailing, Forward, and CAPE
The price-to-earnings ratio is the single most quoted valuation metric in finance—and the single most misapplied. Investors routinely buy "cheap" stocks that stay cheap forever, dismiss expensive-looking compounders that double again, and compare P/Es across sectors where the comparison is meanin...
Calibrating Target Prices with Risk/Reward
Convert valuation ranges into actionable position sizing using risk/reward ratios, probability weighting, and expected value calculations with worked examples
EV/EBITDA and EV/EBIT: When to Use Each
Compare EV/EBITDA (28x for software, 5x for oil & gas) vs EV/EBIT with worked examples showing why depreciation policies drive the choice.
Discounted Cash Flow Valuation: A Practitioner's Guide
Master DCF fundamentals including FCFF vs FCFE mechanics, terminal value methods, and the 70-80% terminal value reality that makes or breaks your model.
Adjusting for Share-Based Compensation and Dilution
Share-based compensation (SBC) is a real economic cost that many investors ignore in DCF models, leading to overvaluation of 15-30% for tech companies where SBC runs 10-20% of revenue. The practical antidote isn't complicated: treat SBC as an expense (because it is), then use the treasury stock meth
Sum-of-the-Parts Valuation for Conglomerates
When General Electric completed its three-way split in April 2024, the combined market capitalization of GE Aerospace, GE Vernova, and GE HealthCare exceeded $215 billion--more than four times what the conglomerate had been worth before it started separating. The value was always there. The marke...
Revenue Multiples for High-Growth Firms
How to value unprofitable growth companies using EV/Revenue, the Rule of 40, and SaaS multiple benchmarks from 2015-2025
Checking Results Against Market-Implied Expectations
Use reverse DCF to extract the growth rate embedded in stock prices, compare it to your own view, and avoid confirmation bias in valuation work
Monte Carlo Simulation for Equity Valuation
How to transform DCF models from single-point estimates to probability distributions using Monte Carlo simulation with 1,000+ iterations
Glossary: Valuation Methodologies
28 essential valuation terms with concise definitions covering DCF components, multiples, adjustments, and valuation concepts every investor should know
Common Pitfalls in DIY Valuation Models
The 10 most frequent valuation errors with quantified impacts: a 1% discount rate change moves value 10-15%, including historical cash flows inflates by 15-20%, and aggressive terminal growth inflates by 40%