The Little Book of Valuation
Library · Investing
- Author: Aswath Damodaran
- FinSimLab rating: 4/5
- Reading: Moderate
- Finance level: Intermediate
- Published: 2011
An introduction to valuing a company by its cash flows and by comparison with others.
What it covers
Damodaran, a finance professor at New York University, explains the two main approaches to valuation: intrinsic, from discounted cash flows, and relative, using multiples such as P/E. He shows how the assumptions change depending on whether a company is young, mature, in distress or a bank.
What you will learn
- How to value a company by discounting its cash flows.
- When multiples make sense and what their limits are.
- How the assumptions change with the company's stage.
Who it is for
People who already understand the basic ratios and want to learn to estimate what a share is worth.
Concepts
Valuation, Stocks
What you will not learn
Index investing or personal planning: it focuses on valuing companies.
Already read a book on this?
- It shares valuing companies with The Intelligent Investor. If you have read The Intelligent Investor, this one mainly adds today's techniques: discounted cash flows and multiples. The Intelligent Investor
We suggest you continue with
Related Academy guides
- How to value a stock: multiples and discounted cash flow
- Free cash flow: why it matters more than earnings
- P/E ratio explained: how to value a stock
- How to project the future price of a stock
Put it into practice
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- The Intelligent Investor
- A Random Walk Down Wall Street
- The Little Book of Common Sense Investing
- The Simple Path to Wealth
- One Up On Wall Street
- Common Stocks and Uncommon Profits
- The Little Book That Beats the Market
- The Most Important Thing
Descriptions written by FinSimLab for educational purposes. They do not summarise the books and are not investment advice.