Home > Store

Dark Side of Valuation, The: Valuing Young, Distressed, and Complex Businesses, 3rd Edition

eBook (Watermarked)

  • Your Price: $46.39
  • List Price: $57.99
  • Includes EPUB and PDF
  • About eBook Formats
  • This eBook includes the following formats, accessible from your Account page after purchase:

    ePub EPUB The open industry format known for its reflowable content and usability on supported mobile devices.

    Adobe Reader PDF The popular standard, used most often with the free Acrobat® Reader® software.

    This eBook requires no passwords or activation to read. We customize your eBook by discreetly watermarking it with your name, making it uniquely yours.

Also available in other formats.

Register your product to gain access to bonus material or receive a coupon.

Description

  • Copyright 2018
  • Dimensions: 7" x 9-1/8"
  • Pages: 800
  • Edition: 3rd
  • eBook (Watermarked)
  • ISBN-10: 0-13-485424-1
  • ISBN-13: 978-0-13-485424-3

The Definitive Guide to Valuing Hard-to-Value Companies: Fully Revised for Today’s Financial Markets

Valuing money-making companies that have long histories and established business models is straightforward. It is when you encounter difficult-to-value companies that you feel the urge to go over to the dark side of valuation—where you abandon first principles and create new metrics. Aswath Damodaran looks at a range of these companies, from start-ups in new businesses to distressed companies, from banks facing regulatory turmoil to commodity firms, and from emerging market upstarts to multinationals that spread across geographies and businesses. With each grouping, he helps you examine the call of the dark side and its practices and frameworks to value these firms.

To answer these questions, Aswath looks at companies across the life cycle and in different markets, from Uber and Shake Shack at one end of the spectrum to Vale, Royal Dutch, and United Technologies at the other end.

In the process, you learn how to

  • Deal with “abnormally low” and negative risk-free rates in valuation
  • Adapt to dynamic and changing risk premiums
  • Value young companies that are disrupting existing businesses
  • Analyze commodity and cyclical companies across cycles
  • Value a company as the sum of its parts or as an aggregation of its users/subscribers and customers
  • Determine the difference between pricing and valuation, and why some investments can only be priced

Sample Content

Table of Contents

Preface to the Third Edition     xx
Chapter 1  The Dark Side of Valuation     1
Foundations of Value     1
Valuation Across Time     7
Valuation Across the Life Cycle     9
Valuation Across the Business Spectrum     15
The Dark Side of Valuation Beckons     23
Conclusion     26
PART I:  ENLIGHTENMENT: THE TOOLS
Chapter 2  Intrinsic Valuation     29

Discounted Cash Flow Valuation     29
Variations on DCF Valuation     63
What Do Intrinsic Valuation Models Tell Us?     73
Conclusion     74
Chapter 3  Probabilistic Valuation: Scenario Analysis, Decision Trees, and Simulations     75
Scenario Analysis     75
Decision Trees     79
Simulations     88
An Overall View of Probabilistic Risk Assessment Approaches     101
Conclusion     104
Chapter 4  Relative Valuation/Pricing     105
What Is Relative Valuation?     105
The Ubiquity of Relative Valuation     107
Reasons for Popularity and Potential Pitfalls     107
Standardized Values and Multiples     109
The Four Basic Steps of Using Multiples     111
Reconciling Relative and Intrinsic Valuations     131
Conclusion     132
Chapter 5  Real Options Valuation     133
The Essence of Real Options     133
Real Options, Risk-Adjusted Value, and Probabilistic Assessments     135
Real Options Examples     137
Caveats for Real Options     153
Conclusion     155
Appendix: Basics of Options and Option Pricing     156
PART II:  THE DARK SIDE OF MACRO INPUTS
Chapter 6  A Shaky Base: A “Risky” Risk-Free Rate     169
What Is a Risk-Free Asset?     169
Why Do Risk-Free Rates Matter?     170
Estimating a Risk-Free Rate     171
Issues in Estimating Risk-Free Rates     180
Closing Thoughts on Risk-Free Rates     194
Conclusion     196
Appendix 6.1     196
Chapter 7  Risky Ventures: Assessing the Price of Risk     199
Why Do Risk Premiums Matter?     199
What Are the Determinants of Risk Premiums?     202
Standard Approaches for Estimating Risk Premiums     204
Equity Risk Premiums     205
Default Spreads     207
Problem Scenarios     208
The Dark Side     209
The Light Side     210
Conclusion     226
Appendix 7.1     227
Chapter 8  Macro Matters: The Real Economy     231
Growth in the Real Economy     231
  The Dark Side     237
  The Light Side     238
Expected Inflation     239
  The Dark Side     246
  The Light Side     247
Exchange Rates     248
  The Dark Side     253
  The Light Side     255
Conclusion     256
PART III:  THE DARK SIDE ACROSS THE LIFE CYCLE
Chapter 9  Baby Steps: Young and Start-Up Companies     259

Young Companies in the Economy     259
Valuation Issues     263
The Dark Side     268
The Light Side     275
Conclusion     321
Chapter 10  Shooting Stars: Valuing Growth Companies     323
Growth Companies     323
Characteristics of Growth Companies     326
Valuation Issues     328
The Dark Side of Valuation     333
The Light Side of Valuation     343
Conclusion     375
Chapter 11  The Grown-Ups: Mature Companies     377
Mature Companies in the Economy     377
Valuation Issues     380
The Dark Side of Valuation     384
Relative Valuation     391
The Light Side of Valuation     392
Conclusion     430
Chapter 12  Winding Down: Declining Companies     431
Declining Companies in the Economy     431
Valuation Issues     433
The Dark Side of Valuation     438
The Light Side of Valuation     446
Conclusion     491
PART IV:  THE DARK SIDE ACROSS COMPANY TYPES
Chapter 13  Ups and Downs: Cyclical and Commodity Companies     493

The Setting     493
The Dark Side of Valuation     496
The Light Side of Valuation     502
Conclusion     524
Chapter 14  Mark to Market: Valuing Financial Services Companies     525
Financial Services Firms: The Big Picture     525
Characteristics of Financial Services Firms     528
The Dark Side of Valuation     532
The Light Side of Valuation     536
Conclusion     560
Chapter 15  Invisible Investments: Valuing Firms with Intangible Assets     561
Firms with Intangible Assets     561
The Dark Side of Valuation     567
The Light Side of Valuation     572
Conclusion     604
Chapter 16  Volatility Rules: Emerging-Market Companies     607
The Role of Emerging-Market Companies     607
The Dark Side of Valuation     610
The Light Side of Valuation     614
Conclusion     639
Chapter 17  Going to Pieces: Disaggregated Value     641
Aggregation versus Disaggregation     641
Multinational Conglomerates     642
The Dark Side of Valuation     648
The Light Side of Valuation     651
User/Subscriber/Customer Companies     677
Conclusion     694
Chapter 18  The Cynic’s Corner: Value versus Price     695
Value versus Price     695
Investing versus Trading     696
The Right Approach     699
Categorizing Investments     702
The Questionable Investments     716
Conclusion     731
PART V:  THE FINALE
Chapter 19  The Jedi Way: Vanquishing the Dark Side     733

Enlightening Propositions     733
Conclusion     742
Index     743

Updates

Submit Errata

More Information

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.

Overview


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information


To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.

Surveys

Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.

Newsletters

If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information


Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.

Security


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.

Children


This site is not directed to children under the age of 13.

Marketing


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information


If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.

Choice/Opt-out


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information


Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents


California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure


Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.

Links


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact


Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice


We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020