Market-Based Valuation, Price and Enterprise Value Multiples (2024 Level II CFA® Exam –Module 4)

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Topic 5 – Equity
Module 4 – Market-Based Valuation, Price and Enterprise Value Multiples
0:00 Introduction and LOS Outcome Statements
4:46 LOS: Distinguish between the method of comparables and the method based on forecasted fundamentals as approaches to using price multiples in valuation, and explain economic rationales for each approach.
8:08 LOS: Calculate and interpret a justified price multiple.
11:38 LOS: Describe rationales for and possible drawbacks to using alternative price multiples and dividend yield in valuation.
14:25 LOS: Calculate and interpret the justified leading and trailing P/Es using the Gordon growth model.
17:07 LOS: Calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS.
27:46 LOS: Explain and justify the use of earnings yield (E/P).
30:15 LOS: Describe fundamental factors that influence alternative price multiples and dividend yield.
30:54 LOS: Calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals.
36:17 LOS: Calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology.
39:22 LOS: Evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables.
45:43 LOS: Calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation.
48:12 LOS: Calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model.
50:34 LOS: Explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition.
51:34 LOS: Calculate and interpret EV multiples and evaluate the use of EV/EBITDA.
54:20 LOS: Explain sources of differences in cross-border valuation comparisons.
56:12 LOS: Describe momentum indicators and their use in valuation.
58:45 LOS: Explain the use of the arithmetic mean, the harmonic mean, the weighted harmonic mean, and the median to describe the central tendency of a group of multiples.
1:02:27 LOS: Evaluate whether a stock is overvalued, fairly valued, or undervalued based on comparisons of multiples.