Valuation
How to put a value on a business. These lessons build the cash flow a valuation rests on, forecast it and value the years beyond the forecast, bridge from the value of the business to the value of a share, express the answer as a multiple, and finally run it backwards to read what a market price assumes.
The real example is Apple's fiscal 2025 accounts: its free cash flow to the firm rebuilt from the cash flow statement, a full discounted cash flow, its multiples, and the growth its market value implies, set beside what it has actually done. Every input that is a judgement is labelled, and the lessons show how far the answer moves with each.
5 lessons, about 2 hours 15 minutes of reading in all. Start at the top and go in order.
After this module you will be able to
- build free cash flow to the firm from operating profit, tax, depreciation, capital spending and working capital
- value the years beyond a forecast with a terminal value and say how much of the answer it carries
- take a discounted cash flow from enterprise value to equity value and a value per share
- calculate valuation multiples, and say what growth, risk and return they contain
- run a valuation backwards to read the growth that a market price assumes
The lessons
- Free Cash Flow to the FirmHow to calculate free cash flow to the firm from operating profit, tax, capital spending and working capital, with a live calculator and Apple's accounts.
- Terminal ValueHow a DCF forecast and terminal value work, why the terminal value is most of the total, and how rate and growth move it. Live calculator.
- DCF ValuationHow a discounted cash flow valuation works from forecast to value per share, with a live calculator, sensitivity tables and Apple's accounts.
- Valuation MultiplesHow to calculate P/E, EV/EBITDA and other valuation multiples, what growth and risk justify, and when comparisons mislead. Live calculator, Apple's figures.
- Reverse DCFHow a reverse DCF turns a market price into the growth it assumes, with a live calculator and Apple's market value compared with its record.