Market Cap to GDP Ratio (The Buffett Indicator)
What is the Market Cap to GDP Ratio? The Market Cap to GDP Ratio (also known as the Buffett Indicator) is a measure of the total value of all publicly-traded stocks in a country, divided by that country’s Gross Domestic Product (GDP). It used as a broad way of assessing whether the country’s stock market...
Adjusted Present Value (APV)
What is Adjusted Present Value (APV)? Adjusted Present Value (APV) is used for the valuation of projects and companies. It takes the net present value (NPV), plus the present value of debt financing costs, which include interest tax shields, costs of debt issuance, costs of financial distress, financial subsidies, etc. So why do we use Adjusted Present...
Types of Valuation Multiples
What are Valuation Multiples? Valuation multiples are financial measurement tools that evaluate one financial metric as a ratio of another to make different companies more comparable. Multiples are the ratios of one financial metric (i.e., Share Price) to another (i.e., Earnings per Share). It is an easy way to compute a company’s value and compare...
Present Value of Growth Opportunities (PVGO)
What is Present Value of Growth Opportunities? Present Value of Growth Opportunities (PVGO) is a concept that gives analysts a different approach to equity valuation. Considering that valuation in stock markets is a combination of fundamentals and expectations, we can break down the value of a stock to the sum of (1) its value assuming...
Comparable Company Analysis
What is Comparable Company Analysis? Comparable company analysis (or “comps” for short) is a valuation methodology that looks at ratios of similar public companies and uses them to derive the value of another business. Comps is a relative form of valuation, unlike a discounted cash flow (DCF) analysis, which is an intrinsic form of valuation....
