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Equity Valuation in R

Learn the fundamentals of valuing stocks.

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4 Hours16 Videos58 Exercises
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Course Description

How do we know when a stock is cheap or expensive? To do this, we need to compare the stock's price with its value. The price of the stock can be obtained by looking at various public sources, such as Yahoo Finance or Google Finance. The value of the stock though is much harder to identify. Every investor has to form his or her valuation of the stock. In this course, you will learn the fundamentals of valuing stocks using present value approaches, such as free cash flow to equity and dividend discount models, and valuation multiples. By the end of this course, you will be able to build your own valuation models.
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In the following Tracks

Applied Finance in R

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  1. 1

    Present Value Approaches

    Free

    Many individuals and institutions invest in equities. To do so effectively, the investor must have a solid understanding of how the value of the equity compares to the stock price. In this course, we focus on fundamental concepts of equity valuation. We begin with a discussion of time value of money and then move on to the first of two discounted cash flow methods we will discuss - the free cash flow to equity valuation model.

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    Course Intro and Fundamental Valuation
    50 xp
    Time Value of Money
    100 xp
    Difference Between Valuing Enterprise and Equity Cash Flows
    50 xp
    The Free Cash Flow to Equity Model
    50 xp
    Calculating Operating Profit
    50 xp
    Calculate Free Cash Flow to Equity
    100 xp
    Calculating Terminal Value
    100 xp
    Calculating Equity Value
    50 xp
    Calculating Present Value of Free Cash Flow to Equity
    100 xp
    Calculate Present Value of Terminal Value
    100 xp
    Calculate Equity Value
    100 xp
  2. 2

    Perpetuity Growth Rate, Analyzing Projections, and Using a Dividend Discount Model

    One of the critical components of free cash flow to equity valuation is using reliable projections. In the first part of this chapter, we will discuss ways to analyze the projections to help us identify the right questions to ask. In the second part of this chapter, we will go through the second of our discounted cash flow models - the dividend discount model. In this approach, we discount expected dividends instead of free cash flows.

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  3. 3

    Discount Rate / Cost of Capital Estimation

    To be able to discount cash flows, we need a discount rate. For the free cash flow to equity and dividend discount model, the cost of equity is the appropriate discount rate. In this chapter, we will discuss how each of the components of the cost of equity are calculated.

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  4. 4

    Relative Valuation

    Relative valuation allows us to use the valuation of comparable companies to infer the value of our subject firm. In this chapter, we discuss how to identify comparable companies and how to calculate valuation multiples. We also show how to analyze the determinants of multiples.

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In the following Tracks

Applied Finance in R

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Datasets

Historical returnsUS Treasury dataS&P 400 Midcap IndexMylan prices

Collaborators

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Lore Dirick
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Sumedh Panchadhar
Clifford Ang HeadshotClifford Ang

Vice President at Compass Lexecon

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