Aswath Damodaran
I teach corporate finance, valuation and investment philosophies at the Stern School of Business at New York University. I have online versions of all three courses here, as well as other finance-related videos. 1. The Corporate Finance Online playlist has an introductory video and 36 sessions that cover all of corporate finance (at least as I see it). 2. The Valuation playlist has 25 sessions that cover valuation approaches, issues and questions.3. The Investment Philosophies playlist has sessions that cover different investment philosophies.4. The Accounting and Statistics playlists reflect my quirky and unorthodox introductions to two disciplines that are critical to my valuation and...
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The Greatest Cash Machine in History: An Analysis of Apple (February 2017)
<p>Apple is one of the great cash machines of all time, a company that has returned more cash ($183 billion) over the last five years than any other company in the world, while simultaneously building a cash balance of almost $250 billion. In a quarterly ritual that I started in 2010, I value Apple after its most recent earnings report (end of January 2017) and find it fully priced after an extended period where it was under valued (and in my portfolio). That is, though, based on my story and you are free to come up with yours and use my spreadsheet to...
Session 9: Betas - Drivers and Determinants
<p>In this class, we looked past regression betas at how the choices companies make about the businesses they enter can determine their betas.. Summarizing the class, here is what we listed as the three determinants of betas:<br>1. Betas are determined in large part by the nature of your business. While I am not an expert on strategy, marketing or productions, decisions that you make in those disciplines can affect your beta. Thus, your decision to go for a price leader as opposed to a cost leader (I hope I am getting my erminology right) or build up a...
Session 6: Measuring Relative Risk (Equity) and Cost of Debt
<p>In today’s class, we started by reviewing the pitfalls of regression betas and went on to talk about bottom up betas, focusing on defining comparable firms and expanding the sample. I did make a big deal about bottom up betas, but may have still not convinced you or left you hazy about some of the details. If so, I thought it might be simpler to just send you a document that I put together on the top ten questions that you may have or get asked about bottom up betas. I think it covers pretty much all of th...
Session 9: Growth Rates
<p>(The first 35 minutes of class were taken up by the first quiz and that time was not recorded. The rest of the class was recorded.)<br>In the session, which occurred after the quiz i, we started on our assessment of growth rates, starting with historical growth rates, before looking at analysts estimates of growth and why they do not carry more predictive power (given that analysts often are immersed in company-specific knowledge and have access to management). We then looked at tying growth to two fundamental questions: (1) how much companies reinvest and (2) how well. The way we measure...
Session 4: Closing the books on the objective function and Opening the one on Risk
<p>The objective function matters, and there are no perfect objectives. That is the message of the last two classes. Once you have absorbed that, I am willing to accept the fact that you still don't quite buy into the "maximize value" objective. That is fine and I would like you to keep thinking about a better alternative with three caveats. First, you cannot cop out and give me multiple objectives - I too would like to maximize stockholder wealth, maximize customer satisfaction, maximize social welfare and employee benefits at the same time but it is just not doable. Second...
Session 11: Growth generalized!
<p>The first 35 minutes of this class were taken up by the first quiz.<br> In the shortened session after the quiz, which occurred after the quiz i, we started on our assessment of growth, especially when returns on capital and margins are changing. We focused on the three elements that go into the story/numbers for a company: its revenue growth rate, determined by the size of the market and extent of market share, its operating margin driven by unit economics and competitions and its investment efficiency. The key as I noted is to tie your inputs on these...
Session 10: Closure on Cost of Equity
<p>(Quiz in first 30 minutes)<br>We started class today by looking at the process of estimating betas for the remaining public companies in the mix, with financial service companies being treated a little differently, because debt is impossible to nail down, and levering and unlevering betas is tough to do. We also examined how to estimate the cost of equity of a private company, and why it may be higher than an otherwise equivalent public company.<br>Slides: https://pages.stern.nyu.edu/~adamodar/podcasts/cfspr23/session10slides.pdf<br>Post class test: https://pages.stern.nyu.edu/~adamodar...
Session 3: Managers, Markets and Morality
<p>This session extended the discussion of everything that can wrong in the real world. Lenders, left unprotected, will be exploited. Information can be noisy and markets can be irrational. Social costs can be large. Relating back to class, I have a couple of items on the agenda and neither requires extensive reading or research. I would like you to think about market efficiency without any preconceptions. You may believe that markets are short term, volatile and over react, but I would like you to consider the basis of these beliefs. Is it because you have anecdotal evidence or because...
Session 10: Growth and Terminal Value
<p>If this session seems to pass by in a blur, it is because we covered a lot during the class. We started with a continuation of our discussion of fundamental growth rates, starting with non-cash net income and then moving on to operating income. We then looked at the more general question of how to estimate growth and cash flows, when margins are changing. In particular, I used Airbnb’s IPO valuation as an illustrative example. If you are interested in getting more detail on my reasoning, you can try this post that I had at the time of th...
Data 2017 Update 9: Dividends, Rodney Dangerfield of Corporate Finance
<p>The dividend decision of a firm is akin to harvesting for a farmer, the coming to fruition of all your good decisions and hard work. Rather than being the residual decision (the one made after your investment and financing decisions), in many firms, it is set first and everything else follows. In this session, I look at dividend yields & payouts around the world and the shift towards buybacks happening in the US (and spilling over to the rest of the world).<br>Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/dataupdate9.pdf<br>Blog Post: http://aswathdamodaran.blogspot...
