Posts by: WST Expert 1
Re: Discounted EVA approach
Actually, we don't really like EVA much - it originally took on importance as a mgmt compensation metric as opposed to a valuation approach. By definition, it will yield a lower valuation since you are subtracting out the cost of capital, so you can think of it almost as an attempt to measure "... Read More
Actually, we don't really like EVA much - it originally took on importance as a mgmt compensation metric as opposed to a valuation approach. By definition, it will yield a lower valuation since you are subtracting out the cost of capital, so you can think of it almost as an attempt to measure "... Read More
Re: DCF analysis: net debt should be actual not est
You are correct. the footnote in A42 should say PV as of Jan 31, 2006 which is our "Fiscal 2005". Good catch! We messed that one up (big no-no!) because normally fiscal years are dec 31 year end. so normally we say Dec 31 of and then the first estimated year minus one. which is the same as... Read More
You are correct. the footnote in A42 should say PV as of Jan 31, 2006 which is our "Fiscal 2005". Good catch! We messed that one up (big no-no!) because normally fiscal years are dec 31 year end. so normally we say Dec 31 of and then the first estimated year minus one. which is the same as... Read More
Re: Ev calc? Inlcude postretirement liab's and pension liab's?
Comps are relevant because you have to see the treatment across board. If all comps have the same problem then you have to go with what the market is treating everyone else at. Short answer: do not include liabilities when calc'ing TEV from stock price Slightly longer answer: when buying the compa... Read More
Comps are relevant because you have to see the treatment across board. If all comps have the same problem then you have to go with what the market is treating everyone else at. Short answer: do not include liabilities when calc'ing TEV from stock price Slightly longer answer: when buying the compa... Read More
RE: ROE vs Revenue as stock return predictor
1) Revenue - correct, it does not capture expenses or profit margins. the "retention" of the revenue is very important! the more of that dollar of revenue you keep, the more it is worth! 2) ROE is an important metric for banks because they employ leverage - they borrow deposits and use that to ma... Read More
1) Revenue - correct, it does not capture expenses or profit margins. the "retention" of the revenue is very important! the more of that dollar of revenue you keep, the more it is worth! 2) ROE is an important metric for banks because they employ leverage - they borrow deposits and use that to ma... Read More
RE: Accounting: KEY RATIOS....
I don't have work experience in the field either. So I won't comment on about the employers' expectations. However, IMHO, understanding key ratios is quite important with respect to the work of an analyst. Analyst's work is to convert the clutter of financial information into knowledge revealing ... Read More
I don't have work experience in the field either. So I won't comment on about the employers' expectations. However, IMHO, understanding key ratios is quite important with respect to the work of an analyst. Analyst's work is to convert the clutter of financial information into knowledge revealing ... Read More
Re: Seg/rev build up questions
Just the WMT Segment is repeated.
the full Segment course has total 4 segment build-up approaches.
You are correct on the International vs Net International labels.
Just the WMT Segment is repeated.
the full Segment course has total 4 segment build-up approaches.
You are correct on the International vs Net International labels.
RE: How is the WACC - cost of debt affected by a tax benefit?
Recall that WACC and therefore, the cost of debt is based on marginal, incremental borrowing rate. You are always trying to capture a "normalized" run-rate discount rate. The fact that you have NOL's (tax benefit) should be irrelevant because again, one is trying to capture normalized tax rate and t... Read More
Recall that WACC and therefore, the cost of debt is based on marginal, incremental borrowing rate. You are always trying to capture a "normalized" run-rate discount rate. The fact that you have NOL's (tax benefit) should be irrelevant because again, one is trying to capture normalized tax rate and t... Read More
RE: Accounting: KEY RATIOS....
It is ok not to memorize but be familiar with. However, on an interview it wouldn't be unfair to expect questions to test your overall knowledge. Join our WST Facebook Group: http://www.faceb... Read More
It is ok not to memorize but be familiar with. However, on an interview it wouldn't be unfair to expect questions to test your overall knowledge. Join our WST Facebook Group: http://www.faceb... Read More
Re: Valuing a perpetuity linked to inflation
use gordon growth formula to value a growing annuity stream. of course, that requires you to make an assumption about average inflation rates over time.
CF * (1+g) / (r-g)
use gordon growth formula to value a growing annuity stream. of course, that requires you to make an assumption about average inflation rates over time.
CF * (1+g) / (r-g)
EBITDA - no adjustment for non-cash, remember it's a proxy for cash flow, not trying to really figure out cash flow. It's supposed to measure core ability to generate cash - if you want true cash flow, I would point to FCFF instead which incorporates Working Capital changes (and obviously CapEx). ... EBITDA - no adjustment for non-cash, remember it's a proxy for cash flow, not trying to really figure out cash flow. It's supposed to measure core ability to generate cash - if you want true cash flow, I would point to FCFF instead which incorporates Working Capital changes (and obviously CapEx).
Remember to ask yourself, what is the whole point of EBITDA or other figures? In this case, EBITDA is used by the market as a major valuation multiple, for better or worse. There are plenty of debates out there on its shortfalls and everyone's opinions on a better measure, but the fact remains, that is what the market uses for measurement purposes. So in short, you do not have to pay respects to the fact that EBITDA is a mixed figure of accrual and cash-based accounting.
Regarding pension expense and OPEB expense: in general, pension and other post-employment benefits have already been accrued for GAAP purposes in expenses and therefore, are not supposed to be added back to EBITDA because then you overstate the "core profitability" and "core cash flow generation". Note that this is different from IRS tax books in which pension expenses are not recognized based on accrual basis but when actually paid! Read More