Absolute Equity Valuation, Part I: An Overview
In his seminal 1938 work, “The Theory of Investment Value,” John Burr Williams expounded on his theory that a common stock’s intrinsic value equals the present value of all its future dividends. Since then, considerable advances have been made in the field of security analysis and valuation. But the basic principals have remained the same.
This article is the first in a series comprising a basic overview of absolute security valuation as it applies to the common equity of domestic public companies. Our topics will include popular cash flow definitions, their formulas, underlying assumptions, applications, and multistage model equations. A detailed discussion of determining discount rates and growth rates is beyond the scope of this particular series.
Tags: free cash flow to equity, fundamental analysis, intrinsic value, market-based model, multistage model, residual income, terminal value
Fundamental Analysis | Sargon Zia | 
July 18, 2010 10:43 pm | 
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