Posts Tagged → Valuation

What is the best way to use the Total Addressable Market (TAM) to value a business?

The Total Addressable Market (TAM) is the total demand for a product or service that a company can go after. It is the estimated revenue opportunity should a company be able to capture 100% market share and sell its offering to every available customer.

The Total Addressable Market (TAM) is the total demand for a product or service that a company can go after. It is the estimated revenue opportunity should a company be able to capture 100% market share and sell its offering to every available customer. TABLE OF CONTENTS: The Total Addressable Market explained. The Total Addressable… Continue reading →

What is the best way to use the Dividend Discount Model (DDM) to value stocks?

The Dividend Discount Model (DDM) is a valuation method that uses Dividends instead of Free Cash Flow to calculate Intrinsic Value. The Intrinsic value of a stock is the sum of all the expected future dividends, discounted back to a present value.

The Dividend Discount Model (DDM) is a valuation method that uses Dividends instead of Free Cash Flow to calculate Intrinsic Value. The Intrinsic value of a stock is the sum of all the expected future dividends, discounted back to a present value. Table of Contents: The Dividend Discount Model explained. The Dividend Discount Model (DDM)… Continue reading →

What is the best way to use the Multiples Valuation approach to value stocks?

Multiples Valuation Analysis is a relative valuation method using financial ratios such as the P/E ratio or the EV/EBITDA ratio. This approach values a company based on specific operating metrics, such as earnings or cash flow. It is also referred to as the market-based approach, as it suggests that similar companies should have comparable valuations based on underlying assets.

Multiples Valuation Analysis is a relative valuation method using financial ratios such as the P/E ratio or the EV/EBITDA ratio. This approach values a company based on specific operating metrics, such as earnings or cash flow. It is also referred to as the market-based approach, as it suggests that similar companies should have comparable valuations… Continue reading →

What is the best way to use the Reverse DCF Model to value stocks?

The Reverse DCF Model is an excellent tool for valuing a stock based on the market’s pricing rather than your own forecast. This model uses the Inversion concept which is a modified version of the Discounted Cash Flow model. By beginning with the current stock price and adjusting the expected growth of the business, we can determine the amount of growth that is factored into the share price.

The Reverse DCF Model is an excellent tool for valuing a stock based on the market’s pricing rather than your own forecast. This model uses the Inversion concept which is a modified version of the Discounted Cash Flow model. By beginning with the current stock price and adjusting the expected growth of the business, we… Continue reading →

Using a Margin of Safety can be one of the most practical ways to invest.

Margin of Safety is a term used to describe the difference between the current share price of a stock and its intrinsic value. In other words, it is the discount at which the stock is trading in comparison to its actual worth. The Margin of safety is not necessarily an equation but a guiding philosophy grounded in investment discipline. It invokes logical decision-making, fundamental analysis, a long-term mindset with a focus on risk management.

Margin of Safety is a term used to describe the difference between the current share price of a stock and its intrinsic value. In other words, it is the discount at which the stock is trading in comparison to its actual worth. The Margin of safety is not necessarily an equation but a guiding philosophy… Continue reading →

What is the meaning of Intrinsic Value and why its one of the most important terms?

This is where the concept of Intrinsic Value comes in. It is a measure of the true worth of an asset. This is independent of the Market Value which is determined by what investors are willing to pay.

What is Intrinsic Value? Knowing whether you are paying a fair price for a stock can be challenging. This is where the concept of Intrinsic Value comes in. It is a measure of the true worth of an asset. This is independent of the Market Value which is determined by what investors are willing to… Continue reading →

What is the Price-to-Sales ratio and how to use it?

The price-to-sales ratio is a “valuation metric” used to measure the value of a company compared to its annual sales (revenue). It can be measured using market capitalisation against total revenue or on a per-share basis against sales per share. The price-to-sales ratio indicates what investors are willing to pay for every dollar of sales generated by the business.

The Price-to-Sales explained. The price-to-sales ratio is a “valuation metric” used to measure the value of a company compared to its annual sales (revenue). It can be measured using market capitalisation against total revenue or on a per-share basis against sales per share. The price-to-sales ratio indicates what investors are willing to pay for every… Continue reading →