One of the questions I have frequently been asked lately is, “How do you analyze businesses?” I usually respond by noting that determining a company’s intrinsic value is a subjective operation. It is nearly impossible to determine a company’s precise value but it is not hard to determine its approximate value and that is the aim, to be approximately right and not precisely wrong.
How to Value a Stock with Reverse DCF
What the reverse DCF attempts to do in order to improve from the reputation of its twin, is to eliminate the need to forecast. Instead of starting with a given year’s FCF, and then projecting towards an unknown, the purpose of the reverse discounted cash flow is to calculate what growth rate the market is applying to the current stock price.
How Companies Misuse Capitalizing of Expenses
Companies expense costs related to the business which offsets revenue, but there are instances where companies will record costs as an asset on the balance sheet. This is what you call “capitalizing”. Note that this is completely different to capitalization/capital structure, which is how a firm finances its overall operations and growth by using different sources of funds.
Understanding the Straight Line and Accelerated Depreciation Methods
The simplest and most commonly used method of depreciation is the straight line method. The straight line depreciation method takes the purchase or acquisition price, subtracts the salvage value and then divides it by the total estimated life in years. For example, an equipment worth $1m with an estimated life of five years and salvage value of $100,000 would have the following depreciation schedule and asset value after each year as shown below.
Details of the FIFO LIFO Inventory Valuation Methods
This article will help you learn how to calculate FIFO LIFO for easy inventory valuation. Plus, how profits and assets affect inventory valuation.
How to Perform a Reverse Stock Valuation
Written by Jae Jun follow me on Facebook Twitter Many times, astounding and insightful information comes simply from asking and […]
Cash Flow Statement Competitive Advantages
This is part three of Identifying Durable Competitive Advantages by Analyzing Financial Statements. Part one: Finding Durable Competitive Advantages by […]
How to Find the Intrinsic Value of a Business
This piece explores ways to find intrinsic value and why it is Important in value investing. Also, here’s how to use the two parts of the DCF method to easily find intrinsic value.
Comparing CROIC, ROIC and ROE Formula
A classic OSV in-depth guide to help you learn how to calculate ROE, ROIC, and CROIC to quickly calculate returns. And why the level of CROIC is less important than an increasing CROIC.
How to Invest: Research and Valuation Process
How to Invest in the Stock Market: Part 1 | Part 2 | Part 3 | Part 4 | Part […]
