Intrinsic value is the present value of expected future cash flows
Active investors seek mispriced securities using public information
Fundamental analysis estimates intrinsic value from business economics
A valuation is only as good as the information behind it
Efficient markets view: price already reflects available information
Valuation is a workflow, not a single formula
Going-concern value assumes the firm keeps operating
The right project rate is the opportunity cost of capital for that project’s risk
Estimate the project rate from pure-play comparables, not the diversified parent
The divisional method sets one WACC per business unit, not per firm or per project
A hurdle rate is the minimum return a project must clear to be funded
Match the discount rate to the project’s systematic risk
The fallacy applies one firm WACC to every project regardless of risk
Match the cash flow to the discount rate of the same claimants
Value is created only when ROIC exceeds WACC
Value is driven by growth, ROIC and WACC together
The CAP is how long ROIC can stay above WACC
Accretive raises EPS, dilutive lowers it
Incentive pay aligns managers with owners, but the metric drives behaviour
Myopia favours near-term earnings over long-run value
Agency conflict: managers control the firm but do not fully bear owners’ outcomes
With unlimited funds, accept every positive-NPV project
Flex one input at a time, holding all others at their expected values
Builds a few coherent stories, typically base, optimistic and pessimistic
Finds the critical value of a driver that pushes NPV to zero
Assigns a probability distribution to each uncertain input
Map flexibility to expand, delay or abandon as information arrives
Risk means outcomes unknown but probabilities known, like a fair die
Macro risk spans interest rates, inflation, exchange rates and the cycle
PE invests in unlisted firms or takes listed firms private by buying all shares
VC is a subset of PE for early-stage, high-growth startups
A real option is the right, not the obligation, to act once uncertainty resolves
The three core real options are expand, abandon and delay
A control premium is paid above market price to acquire a controlling stake
An illiquidity discount lowers the value of assets that cannot be sold quickly
The workflow runs from information gathering to a buy, hold or sell verdict
Traditional valuation rests on uncertain forecasts and a discount rate
Pro-forma projects the income statement, balance sheet and cash-flow statement together
Forecasts each variable line as a fixed historical fraction of sales
The sales forecast is the most important single assumption in a valuation
Growth ties up cash in working capital and demands capex
A pro-forma balance sheet seldom balances after the operating forecast
Normalization strips reported profit to a recurring, maintainable base
Cyclical firms should be forecast from a mid-cycle, not a peak or trough, base
Sustainable growth is the rate financeable from retained earnings alone
Comparables apply a peer multiple to the target’s own metric
P/E is price per share divided by earnings per share
EV/EBITDA divides enterprise value by pre-interest operating earnings
P/B is market value of equity over book value of equity
P/S is market value of equity over revenue
PEG divides the P/E by the expected earnings growth rate
Precedent transactions use multiples paid in past acquisitions
Multiples are fast, market-based and a transparent reality check
WACC blends after-tax costs of debt, preferred and equity by market-value weights
Cost of equity is the hardest WACC input, since equity holders are residual claimants
Cost of debt is the YTM on the firm’s traded bonds, not the coupon
Weights are each source’s share of total invested capital
Equity beta equals business risk plus financial leverage risk
Hamada’s simple form assumes a zero debt beta, that is, risk-free debt
Risk-free rate is the safe base return, matched to the cash-flow horizon
Free cash flow is a cash measure, deliberately distinct from accounting Net Income
Count only cash flows that change with the decision, with minus without
A sunk cost is already spent and unrecoverable, so it is irrelevant
NPV is the present value of future cash flows minus the cash invested today
A dollar today beats a dollar tomorrow because it can be reinvested
Year-end discounting assumes cash arrives in one lump at the period end
Terminal value captures all cash beyond the explicit forecast horizon
Raw NPV unfairly favours longer projects with more years to accrue value
Enterprise value is the value of the operating business to all capital providers
The bridge crosses from enterprise value to equity value
Three steps: forecast FCFF, discount at WACC, add terminal value
APV is unlevered value plus the value of financing side effects (Myers 1974)
Interest is tax-deductible, so debt creates a tax saving
Two-stage: explicit planning period then a stable terminal stage
Terminal value dominates a DCF, so compute it two ways
The operating DCF excludes anything outside operations
Vinamilk (VNM) is a stable dairy staple, revenue about VND 62 trillion (FY2024)
Hoa Phat (HPG) is a cyclical steelmaker, revenue about VND 140 trillion (FY2024)
FPT is a high-growth IT-services group, revenue about VND 62 trillion (FY2024)
Masan (MSN) is a consumer and retail conglomerate, revenue about VND 84 trillion (FY2024)
Mobile World (MWG) is a sales-driven retailer, revenue about VND 134 trillion (FY2024)