Aswath Damodaran - Valuation
Lesson 1 - Intro to Valuation
Problems in valuation: 1. Bias 2. Uncertainty
Compares investing to lemmings jumping of a cliff.
Valuation is like a life west. It doesn’t mean you won’t make mistakes, it will just make them slower and hurt less. Gives your rational side a chance to speak.
In models the numbers are estimates and therefore can’t be counted on being fully objective.
Less is more. If you can value a company with 3 parameters , don’t go looking for five.
There are three approaches to valuation
Intrinsic Valuation (fundamentals, it’s all about the business) Basically present value of all expected cash flows
Relative Valuation (looking at prices for similar companies)
Option pricing models based on contingent cash flows. Essentially cash flows that are dependent on a certain event (fda approval, oil price going up, etc)