■ Valuation Ratios:
● P/E: It is a valuation parameter that measures the company’s current share price relative to its per-share earnings. Generally, high P/E is Overvalued & low P/E is Undervalued.
P/E Rerating happens when the stock price rises without any growth in earnings, just on the basis of future earnings growth possibility. P/E Derating is when stock price falls without fall in earnings, but due to the expectation of fall in earnings.
(Stock Return= PE Rerating + Earnings Growth)
Market value per share
P/E Ratio : ----------------------------
Earnings per share
● PEG Ratio: a PEG ratio value of 1 represents a perfect correlation between the company’s market value and its projected earnings growth.
P/E
PEG Ratio: ------------
EPS Growth Rate
EV
● Enterprise Multiple: --------------
EBITDA
EV=Enterprise Value= Market capitalization + total debt − cash and cash equivalents
● DCF: Discounted cash flow is a valuation method that calculates the value of an investment based on the present value of its future income. The method helps to evaluate the attractiveness of an investment opportunity based on its projected future cash flows.
1st Step: FREE CASH FLOW FORMULA
Free Cash Flow = EBIT
- Taxes
+ Depreciation & Amortization
- Capital Expenditures
- Increase in non-cosh working capital
------------------------------------------------------
= Free Cash Flow
NON-CASH WORKING CAPITAL FORMULA = Current Assets - Cash - Current Liabilities
2nd Step: WACC Calculator
WEIGHTED AVERAGE COST OF CAPITAL
3rd Step: TERMINAL VALUE CALCULATOR
4th Step: Discounted cash flows
5th Step : ENTERPRISE VALUE TO EQUITY VALUE
■ Solvency Ratios:
EBIT
● Interest Coverage Ratio= ----------------------
Interest Expense
Current Assets
● Current Ratio = ----------------------
Current Liabilities
Total Liabilities
● Debt/Equity= -----------------------------
Total Shareholders’ Equity
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