In this article, I will show you how to calculate and interpret stock and portfolio beta. Beta, as a measure of a stock or portfolio's volatility relative to the market, offers valuable insights into implied risk for investors. We'll explore the formula for calculating beta and provide detailed, step-by-step instructions on computing and interpreting this […]
In this article, I will demonstrate how to apply mid-year convention, also known as mid-year discounting, in discounted cash flow (DCF) valuation models. Typically, DCF models assume cash flows are received or paid at the end of each period. However, in reality, most businesses generate cash throughout the year. This can lead to standard methods […]
In this article, I will show you how to calendarize financial data in valuation models. Calendarization directly adjusts financial data from companies with differing fiscal year ends to match a standard calendar year. This adjustment is essential for ensuring accurate financial comparisons and analyses, especially when evaluating companies within the same industry that operate on […]
In this article, I will demonstrate how to use the Three-Stage Dividend Discount Model (DDM) to value dividend-paying stocks. As the most advanced among the dividend discount valuation methodologies, this model introduces an initial phase of extraordinary growth, followed by a period where the growth rate either linearly declines or increases, before finally transitioning into […]
In this article, I will show you how to use dividend discount models (DDMs) to value dividend-paying stocks. The premise of DDMs is that stocks can be valued by discounting their expected future dividends to present value, given that expected future stock prices are often influenced by anticipated dividends. DDMs are particularly effective for valuing […]
In this article, I will show you how to apply the H-Model for dividend discount valuation. The H-Model, introduced by Fuller and Hsia in 1984 through their seminal paper "A Simplified Common Stock Valuation Model," builds upon the Gordon Growth Model (GGM). This two-stage model begins with an initial phase characterized by an extraordinary growth […]
In this article, I will demonstrate how to use the Two-Stage Dividend Discount Model (DDM) to value dividend-paying stocks. This model is a refined version of the traditional dividend discount approach, incorporating two distinct phases of dividend growth: initially, a phase of irregular or extraordinary growth, followed by a phase of stable growth into perpetuity. […]
In this article, I will show you how to apply the Gordon Growth Model (GGM) for dividend discount valuation. Named after American economist Myron J. Gordon, who popularized the model in the 1960s, the GGM is used to estimate the intrinsic value of a stock. It calculates the present value of a future series of […]
In this article, I will show you how to estimate the perpetual dividend growth rate in dividend discount models. A key and sensitive input in these models, the perpetual dividend growth rate is the expected rate at which a company's dividends will grow indefinitely. It's essential to accurately estimate this rate as it significantly influences […]