(Pearson Education) is Archive: A comprehensive guide to valuing technology companies, for investors, financial executives, venture capitalist, and other professionals..
Archive: (Pearson Education) A comprehensive guide to valuing technology companies, for investors, financial executives, venture capitalist, and other professionals.
5 detailed case is Includes studies that cover the entire tech lifecycle, from Amazon.com to Cisco and Motorola..
Includes 5 detailed case studies that cover the entire tech lifecycle, from Amazon.com to Cisco and Motorola.
DLC: is Valuation.Amazon.com ReviewIf the tech-stock swoon merely whets your appetite for this roller coaster of a market sector, and your eyes don't glaze over at the very sight of formulas like "Return on Capital = EBIT (1 - t) / Capital Invested," then The Dark Side of Valuation is the investment guide you've been waiting for..
DLC: Valuation.Amazon.com ReviewIf the tech-stock swoon merely whets your appetite for this roller coaster of a market sector, and your eyes don't glaze over at the very sight of formulas like "Return on Capital = EBIT (1 - t) / Capital Invested," then The Dark Side of Valuation is the investment guide you've been waiting for.
New Economy is Whether considering firms at their peak or their valley, writes Aswath Damodaran, the problem has always been determining their true value with equitable dispassion..
Whether considering New Economy firms at their peak or their valley, writes Aswath Damodaran, the problem has always been determining their true value with equitable dispassion.
A leading expert is on the topic, Damodaran begins by noting that standard corporate valuations are determined by four factors: cash flow from existing investments, growth expected from this cash flow, length of time this growth is sustained, and cost of capital to sustain it..
A leading expert on the topic, Damodaran begins by noting that standard corporate valuations are determined by four factors: cash flow from existing investments, growth expected from this cash flow, length of time this growth is sustained, and cost of capital to sustain it.
he is In what admits is not always an easy read, Damodaran then details various ways to adapt conventional valuation methods for companies that lack key traditional variables (such as profits, track records, and even competitors with which they can be compared) in order to arrive at realistic valuations..
In what he admits is not always an easy read, Damodaran then details various ways to adapt conventional valuation methods for companies that lack key traditional variables (such as profits, track records, and even competitors with which they can be compared) in order to arrive at realistic valuations.
charts is Those not scared off by comparing the historical risk for T-bills and T-bonds since 1928 will find this book worth a look..
Those not scared off by charts comparing the historical risk for T-bills and T-bonds since 1928 will find this book worth a look.
--Howard RothmanFrom is the Inside FlapPrefaceDo the old rules still apply?.
--Howard RothmanFrom the Inside FlapPrefaceDo the old rules still apply?
we is Do need new valuation metrics, or are the old metrics flexible enough to deal with the companies that constitute the new economy?.
Do we need new valuation metrics, or are the old metrics flexible enough to deal with the companies that constitute the new economy?
you is Can value a company that has no earnings, no history, and no comparable firms?.
Can you value a company that has no earnings, no history, and no comparable firms?
the questions is These are that I have heard repeatedly over the last few years..
These are the questions that I have heard repeatedly over the last few years.
I is have always believed the fundamentals that determine value are the same, no matter what company you value and what market it is in..
I have always believed the fundamentals that determine value are the same, no matter what company you value and what market it is in.
I is ncreasingly, though, I have faced skeptical audiences who are unwilling to take this belief at face value and have demanded proof that America Online, Amazon, or Priceline can be valued with traditional models.The genesis for this book was a paper I did on valuing Amazon in March 2000, where a discounted cash flow model yielded a value of $34 per share..
Increasingly, though, I have faced skeptical audiences who are unwilling to take this belief at face value and have demanded proof that America Online, Amazon, or Priceline can be valued with traditional models.The genesis for this book was a paper I did on valuing Amazon in March 2000, where a discounted cash flow model yielded a value of $34 per share.
the stock is Since was trading at $80 at that time, there were many who viewed the valuation as either excessively pessimistic or as missing something..
Since the stock was trading at $80 at that time, there were many who viewed the valuation as either excessively pessimistic or as missing something.
The interest in the paper is led me to think about writing a book, but I expanded it to cover both new technology and old technology firms..
The interest in the paper led me to think about writing a book, but I expanded it to cover both new technology and old technology firms.
differences is While there are in estimation that arise across these firms, I believe that they have far more in common..
While there are differences in estimation that arise across these firms, I believe that they have far more in common.
technology is Why firms?.
Why technology firms?
I is believe that traditional valuation books and models (and I count my book on investment valuation among the culprits) have tended to concentrate on valuing manufacturing or traditional service firms..
I believe that traditional valuation books and models (and I count my book on investment valuation among the culprits) have tended to concentrate on valuing manufacturing or traditional service firms.
Technology firms is are different..
Technology firms are different.
They is expand by investing in research and through acquisitions and not by building plant and equipment..
They expand by investing in research and through acquisitions and not by building plant and equipment.
them is Many of have astronomical growth rates in revenues and often, very little in current earnings..
Many of them have astronomical growth rates in revenues and often, very little in current earnings.
Their assets is are often patents, technology, and skilled employees..
Their assets are often patents, technology, and skilled employees.
I is look at how the notions of capital expenditures, operating income, and working capital have to be redefined for these firms.I begin this book by laying out the facts on the growth of technology and, in particular, new technology stocks in the equity market and argue that although the principles of valuation might not shift, the focus can change as firms move through their life cycles..
I look at how the notions of capital expenditures, operating income, and working capital have to be redefined for these firms.I begin this book by laying out the facts on the growth of technology and, in particular, new technology stocks in the equity market and argue that although the principles of valuation might not shift, the focus can change as firms move through their life cycles.
This discussion is is followed by an extended section (Chapters 2-7) on applying traditional discounted cash flow models to value technology stocks, with an emphasis on the estimation of cash flows, growth, and discount rates for these firms..
This discussion is followed by an extended section (Chapters 2-7) on applying traditional discounted cash flow models to value technology stocks, with an emphasis on the estimation of cash flows, growth, and discount rates for these firms.
the next three chapters, is In I look at the use of relative valuation to value technology companies, both in terms of adapting existing multiples (such as price-earnings and price-to-sales ratios) and developing new ones (value per Web site visitor, for instance)..
In the next three chapters, I look at the use of relative valuation to value technology companies, both in terms of adapting existing multiples (such as price-earnings and price-to-sales ratios) and developing new ones (value per Web site visitor, for instance).
Chapter 11, is In "Real Options in Valuation," I consider an argument made by many for the large premiums paid on technology stocks (i.e., they represent real options to expand into a potentially huge e-commerce market), and consider some questions that a skeptic should ask before accepting this argument..
In Chapter 11, "Real Options in Valuation," I consider an argument made by many for the large premiums paid on technology stocks (i.e., they represent real options to expand into a potentially huge e-commerce market), and consider some questions that a skeptic should ask before accepting this argument.
Chapter 12, is In "Value Enhancement," I consider how managers of technology firms can enhance the value of their firms through better investment and financing decisions.The book is structured around the valuations of five technology firms-Motorola, Cisco, Amazon, Ariba, and Rediff..
In Chapter 12, "Value Enhancement," I consider how managers of technology firms can enhance the value of their firms through better investment and financing decisions.The book is structured around the valuations of five technology firms-Motorola, Cisco, Amazon, Ariba, and Rediff.
household names is The first three are but represent three different points in the technology spectrum..
The first three are household names but represent three different points in the technology spectrum.
Motorola is is an old technology firm with substantial investments in existing assets..
Motorola is an old technology firm with substantial investments in existing assets.
It is is also a firm that has fallen on hard times in the last few years, largely as a consequence of poor investments and strategic choices..
It is also a firm that has fallen on hard times in the last few years, largely as a consequence of poor investments and strategic choices.
Cisco is is one of the great success stories of the 1990s, but a great deal of the market value of the firm reflects expectations about the future..
Cisco is one of the great success stories of the 1990s, but a great deal of the market value of the firm reflects expectations about the future.
It is is also a firm that has chosen to grow through acquisitions and has done it very well..
It is also a firm that has chosen to grow through acquisitions and has done it very well.
Amazon is is the poster child (for better or worse) for the new economy stocks that have entered the market in recent years, and the popular press has documented its ups and downs in extensive detail..
Amazon is the poster child (for better or worse) for the new economy stocks that have entered the market in recent years, and the popular press has documented its ups and downs in extensive detail.
Ariba and Rediff is are more recent entrants into the new economy, with Ariba representing the promise (and peril) of the Business-to-Business (B2B) Internet model, and Rediff the potential of an Internet portal serving a market (India) that could be a huge market in the future.One of the limitations of valuing real companies is that your mistakes are there on the printed page for all to see over time, but that prospect does not bother me..
Ariba and Rediff are more recent entrants into the new economy, with Ariba representing the promise (and peril) of the Business-to-Business (B2B) Internet model, and Rediff the potential of an Internet portal serving a market (India) that could be a huge market in the future.One of the limitations of valuing real companies is that your mistakes are there on the printed page for all to see over time, but that prospect does not bother me.
the risk is At of giving away the punch line, I do find discounted cash flow values for all five companies: Motorola ($32.39), Cisco ($44.92), Amazon ($34.37), Ariba ($72.13), and Rediff ($19.05)..
At the risk of giving away the punch line, I do find discounted cash flow values for all five companies: Motorola ($32.39), Cisco ($44.92), Amazon ($34.37), Ariba ($72.13), and Rediff ($19.05).
it is For what is worth, at the time that I did the valuations in June 2000, I found Amazon to be overvalued at $48 per share and Cisco to be overvalued at $64.88..
For what it is worth, at the time that I did the valuations in June 2000, I found Amazon to be overvalued at $48 per share and Cisco to be overvalued at $64.88.
Motorola is at $34.25 per share and Ariba at $75 per share were fairly valued, and Rediff was significantly undervalued at $10 per share..
Motorola at $34.25 per share and Ariba at $75 per share were fairly valued, and Rediff was significantly undervalued at $10 per share.
I is By the time finished the book, Amazon had dropped in value to $30 per share, and Cisco was trading at $51..
By the time I finished the book, Amazon had dropped in value to $30 per share, and Cisco was trading at $51.
Motorola is had gone from being fairly valued to undervalued, Ariba saw its stock price double, and Rediff remained undervalued..
Motorola had gone from being fairly valued to undervalued, Ariba saw its stock price double, and Rediff remained undervalued.
I is have no doubt that you will disagree with me on some of the inputs I have used, and the values that you assign these firms will be different from mine..
I have no doubt that you will disagree with me on some of the inputs I have used, and the values that you assign these firms will be different from mine.
I is What would emphasize, therefore, is not the values that I arrive at for these firms, but the process by which I got there.Finally, I want this book to be useful to a wide audience: individual investors who hold technology stocks in their portfolios, equity research analysts, venture capitalists, and managers at technology firms..
What I would emphasize, therefore, is not the values that I arrive at for these firms, but the process by which I got there.Finally, I want this book to be useful to a wide audience: individual investors who hold technology stocks in their portfolios, equity research analysts, venture capitalists, and managers at technology firms.
portions of the book is There are that I must confess are not easy reading, but I have tried as much as I can to provide an intuitive rationale for everything that I do..
There are portions of the book that I must confess are not easy reading, but I have tried as much as I can to provide an intuitive rationale for everything that I do.
Technology is firms, notwithstanding the back and forth of markets, are here to stay, and valuing them is something we all need to grapple with..
Technology firms, notwithstanding the back and forth of markets, are here to stay, and valuing them is something we all need to grapple with.
I is hope you find this book useful in that endeavor.From the Back CoverThe comprehensive guide to valuing technology companiesProjections for future revenues, earnings, cash flows, the impact of stock options, and more5 detailed case studies cover the entire tech lifecycle: Amazon.com, Ariba, Cisco, Motorola, and a new IPOPresented by one of the world's leading experts in valuationState-of-the-art tools for assessing the value of any technology companyTechnology companies have exploded in importance, yet investors and analysts face unprecedented challenges in valuing them..
I hope you find this book useful in that endeavor.From the Back CoverThe comprehensive guide to valuing technology companiesProjections for future revenues, earnings, cash flows, the impact of stock options, and more5 detailed case studies cover the entire tech lifecycle: Amazon.com, Ariba, Cisco, Motorola, and a new IPOPresented by one of the world's leading experts in valuationState-of-the-art tools for assessing the value of any technology companyTechnology companies have exploded in importance, yet investors and analysts face unprecedented challenges in valuing them.
The Dark Side of Valuation, is In one of the world's leading valuation experts reviews every approach, demonstrating exactly how to adapt traditional techniques to minimize risks and maximize returns.Aswath Damodaran begins with an overview of the markets' dramatic shift towards technology stocks ?.
In The Dark Side of Valuation, one of the world's leading valuation experts reviews every approach, demonstrating exactly how to adapt traditional techniques to minimize risks and maximize returns.Aswath Damodaran begins with an overview of the markets' dramatic shift towards technology stocks ?
He is then identifies key valuation principles and techniques, demonstrating them through five case studies that encompass the entire technology company lifecycle: Amazon.com, Ariba, Cisco, Motorola, and a new IPO-ready startup..
He then identifies key valuation principles and techniques, demonstrating them through five case studies that encompass the entire technology company lifecycle: Amazon.com, Ariba, Cisco, Motorola, and a new IPO-ready startup.
Coverage includes:Adaptation is of discounted cash flow models for tech companies with limited histories, shifting business mixes, and volatile stock pricesThe limitations of traditional accounting definitions in measuring technology company cash flowsSuperior processes for estimating future revenues, earnings, and cash flowsEvaluation of the impact of management and employee stock options on share value and earnings multiplesAn in-depth assessment of PEG and price-to sale ratiosRelative valuation: fundamentals, earnings multiples, and revenue multiples"What a refreshing book to read! Damodaran's book is essential if capital markets are going to accurately gauge the contributions of emerging companies...His insights are illuminating and his mastery of financial analysis is unmatched.".
Coverage includes:Adaptation of discounted cash flow models for tech companies with limited histories, shifting business mixes, and volatile stock pricesThe limitations of traditional accounting definitions in measuring technology company cash flowsSuperior processes for estimating future revenues, earnings, and cash flowsEvaluation of the impact of management and employee stock options on share value and earnings multiplesAn in-depth assessment of PEG and price-to sale ratiosRelative valuation: fundamentals, earnings multiples, and revenue multiples"What a refreshing book to read! Damodaran's book is essential if capital markets are going to accurately gauge the contributions of emerging companies...His insights are illuminating and his mastery of financial analysis is unmatched."