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
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
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
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
A Discounted Cash Flow Model is a method used to determine the value of a business by projecting its future cash flow and discounting that value back to the present value. This technique assists investors in making informed decisions about whether the future cash flow is worth investing in at the current market price. TABLE… Continue reading
* When I first started investing, I just didn’t understand the concept behind the Multiple and how it contributed to returns (or losses) for a stock. This is not about the investing strategy you adopt such as buying undervalued companies based on P/E or buying growth companies based on P/S. This is just a simple… Continue reading
Financial Modelling is a process that recreates a hypothetical forecasted scenario of a company’s future operations and financials. Financial modelling uses past data and creates a summary of the company’s likely projected expenses and earnings that can guide investment decisions. Modelling is most used in corporate finance and includes using various models such as the… Continue reading
What is Mean Reversion? Mean Reversion is a financial theory that suggests that the prices of assets tend to move back to their long-term average or mean level. Price momentum fluctuates around the average mean, overswinging both up and down before eventually returning to the mean. This theory is based on the belief that extreme… Continue reading
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 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
