Introduction to Equity Valuation and DCF Analysis

Register Now

12-13 Oct London

1 day - £650, 2 days - £1350 + VAT. 2 people - 10% discount, 3 people - 12%.

Course Description

This intensive 2 day course is an excellent introduction to equity valuation and analysis. Delegates will be taken through the main types of equity valuation from absolute (DCF, EVA, APV) to relative (P/E, EV/EBIT. EV/EBITDA) methods. During the second day delegates will explore in detail DCF valuation.

By the end of this course you will be able to:

  • Understand the difference and apply in practice the main types of equity valuation techniques
  • To evaluate balance sheet as well as profit and loss accounts and cash flow statements
  • Understand the fundamentals of future cash flow valuation and value assets using basic DCF method
  • Apply discount rates, terminal values and discount period in a DCF valuation
  • Explore the use and the process of comparative company analysis

Course level: Introductory

Prerequisites: To attend this course participant should have working knowledge of accounting and Excel.

You can book each day individually.  See Pricing section for details. 

Day 1: Principles of Valuation & Financial Analysis

Day 2: Absolute Valuation: Introduction to DCF Analysis

What Will You Learn

Main Topics Covered During This Training

  • The core valuation approaches: enterprise and equity value
  • Financing and operating items in the financial statement
  • Non-operating items
  • Valuation tools in practice: CDF, EVA, APV, P/E, EV/EBITA, EV/EBIDTA
  • Calculation and interpretation of key ratios
  • Differences between relative and absolute valuation methods
  • Principles of valuing the cash flows
  • DCF theory and rationale
  • Forecasting free cash flows
  • Calculating NOPAT and FCF from an income statement
  • Identifying the correct discount rates and periods
  • WACC explained
  • Calculating the cost of capital
  • Terminal value approach: stable growth, liquidation value and multiple approach
  • Relative valuation multiples in practice: equity and enterprise based, PEG ratios
  • Comparative company valuation process
  • Determining the valuation
  • Understanding dilution and timing issues

Who Should Attend

From Corporates, Investment Banks, Private Equity, Consulting, Accounting and Legal Companies:

  • Equity Research, Analysts and Sales
  • Equity Capital Markets
  • Investment Managers
  • Members of M&As Departments
  • Corporate Financial Managers
  • Corporate Development
  • Corporate Finance Lawyers
Register Now

12-13 Oct London

1 day - £650, 2 days - £1350 + VAT. 2 people - 10% discount, 3 people - 12%.

Introduction to Equity Valuation and Analysis - 2 Day Programme

You can book 1 or 2 days only.

Day 1: Principles of Valuation & Financial Analysis

Day 2: Absolute Valuation: Introduction to DCF Analysis

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Day 1: Principles of Valuation & Financial Analysis

Fundamental framework

  • Returns and capital, consistency and interaction
  • The core valuation approaches
  • Enterprise value – value to the firm
  • Equity value – value to the shareholder
  • The bridge between enterprise and equity value

Valuation to operations

  • The accounting and market-based approaches
  • Calculating enterprise and equity values
  • Non-operating items
  • Operating items in the financial statements
  • Financing items in the financial statements
  • Definitions of non-equity finance

Non-operating (non-core) items

  • Typical non-operating items
  • Treatment of non-operating items
  • Non-operating items in the financial statements
  • Incorporating non-operating items into a valuation
  • Cleaning the numbers

Valuation tools in practice

  • Absolute valuation tools overview (DCF, EVA, APV)
  • Relative valuation tools overview (P/E, EV/EBIT, EV/EBITDA)
  • Market-based valuation approaches

Case study: Participants calculate various types of valuation using a set of accounts
 
Financial analysis

  • Calculation and interpretation of the key ratios which highlight the principle operating and financial dynamics/risks/flexibility of the business
  • EPS derivation and interpretation (including dilution)
  • How to interpret the value drivers of a business, its operating performance and business and financial risk
  • Company specific transactions, including share issues, purchase of own shares, capital reduction

Case study: Participants calculate and interpret the key ratios for a quoted company

DAY 2: Absolute Valuation - DCF Analysis
______________________________________________________________

Principles of valuing cash flows

  • Discounted cash flow theory and rationale
  • Absolute and relative valuation
  • Basis of DCF
  • Earnings compared to cash flows
  • DCF in context

Case study: Case studies testing participants knowledge and modelling skills
 
Identifying the correct cash flows

  • Understanding which cash flows are discounted in valuing a corporate
  • Core assets vs. non-core assets
  • Free cash flow and NOPAT
  • Forecasting free cash flows
  • Mid cycle earnings, coping with cyclicality

Case study: Participants calculate NOPAT and FCF from an income statement
 
Discount rates

  • Understanding issues surrounding identifying the correct discount rate
  • Which rate to discount at?
  • What is WACC?
  • Discounting the free cash flows

Case study: Participants calculate the cost of capital for a case company
 
Terminal values

  • Gain understanding of key issues surrounding the terminal value in a discounted cash flow forecast
  • How long should the forecast period be?
  • What is the terminal value and is it important?
  • Terminal value approaches
  • Stable growth
  • Liquidation value
  • Multiples approach
  • Terminal value issues

Case study: Participants model the stable growth and multiple approaches to terminal value
 
Discount periods

  • Modelling cash flows that arise outside of a period end
  • Intra-period discounting

Bring it together

  • Using the discounted cash flow model to build a total value of the firm
  • Dealing with core and non-core assets
  • Building the bridge between enterprise and equity valuation

Case study: Participants calculate the bridge to link the enterprise value of operations to the total equity value of the firm
 
Case study:
A forecast of case study cash flows is used to calculate the value of a business using the techniques learnt in previous sessions
 

DAY 3: Relative Valuation: Comparative Company and Multiple Analysis

______________________________________________________________

Relative valuation explained

  • Relative valuation vs. absolute valuation
  • Types of relative valuation
  • Pros and cons of relative valuation
  • Relative multiples in practice
  • Equity-based multiples
  • Enterprise-based multiple
  • PEG ratios
  • Industry-specific multiples

Case study: Participants calculate various multiples for a case company
 
Comparative company valuation process

  • How to standardise multiples
  • The factors that determine the peer group to be used
  • Cleaning the numbers: comparing like with like
  • Determining the valuation: how the various multiples are applied

Case study: Participants complete a comparative company case study determining the peer group, the multiples to be used and arrive at a relative valuation for the business
 
Other factors

  • Other issues: dilution, timing issues

Case study: The participants calculate the dilution effect using various methodologies

The course director is a qualified chartered accountant who begun his career in Grant Thornton International and since 1986 worked in  Ernst & Young as a senior manager in the corporate advisory team, working on major acquisitions, disposals, IPOs and insolvency/restructuring transactions.

In 1989 he joined Threadneedle Asset Management as an analyst, becoming a fund manager specialising in income funds in 1991. In 1996 he joined Scottish Widows Investment Partnership as a director in the UK Equity team, again specialising in income funds. On becoming head of UK Equities in 1998, he introduced a new investment process incorporating cash flow based corporate valuation techniques. In 2000 he was appointed head of UK Equities when Scottish Widows was acquired by Lloyds Bank and he led the integration of the UK Equity teams.
 
In 2001 he joined HSBC Asset Management as European Head of Equity Research, managing a team of analysts in Paris and London tasked with developing a new research team and research process.In 2004 he was appointed Global Head of Equity Research, responsible for 60 global equity research analysts and 40 global credit analysts. He developed a global valuation and research process, training local analysts in Europe, the US and Asia in its use.
 
In 2006 he joined BG Consulting Group, a professional training company, as the head of investment banking and investment management managing a team of 12 trainers. His experience at BG included managing major graduate programmes for investment banking and investment management clients, training graduate to managing director level participants and advising clients on their training requirements for accountancy, corporate finance and valuation, investment management and private wealth training.
 
His clients have included HSBC, Morgan Stanley, Deutsche Bank, Citigroup, Allen & Overy, JP Morgan, Barclays Bank, Barclays Wealth, Morgan Stanley Investment Management and Schroders.

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Introduction to Equity Valuation and DCF Analysis <p>This intensive 2 day course is an excellent introduction to equity valuation and analysis. Delegates will be taken through the main types of equity valuation from absolute (DCF, EVA, APV) to relative (P/E, EV/EBIT. EV/EBITDA) methods. During the second day delegates will explore in detail DCF valuation.</p> <p><strong>By the end of this course you will be able to:</strong></p> <ul> <li>Unde ... London