Equity Valuation Models and Issues
Equity Valuation Models and Issues aims to take the accounting concepts and techniques developed and appraised in Financial Statement Analysis and to apply them to the valuation of equities in major industrial sectors. This involves developing and appraising critically a set of competing models of corporate valuation.
Research in Teaching
The whole module is informed by academic research.
Full module specification
|Module title:||Equity Valuation Models and Issues|
|Duration of module:||
Duration (weeks) - term 2: |
Equity Valuation Models and Issues aims to take the accounting concepts and techniques developed and appraised in Financial Statement. Analysis and to apply them to the valuation of equities in major industrial sectors. This involves developing and appraising critically a set of competing models of corporate valuation. These are applied in a variety of geographic, industrial and other specialised circumstances requiring careful selection of appropriate valuation methods and the interpretation of different standards of financial reporting and disclosure. Ultimately the aim is to give students the ability to produce equity research reports for industry sectors and individual companies of a standard specified by major investment firms.
ILO: Module-specific skills
- 1. Have the ability to apply selectively and critically 'new' value enhancement and valuation paradigms.
- 2. Be able to understand the complex issues which are the proper focus of investment analysis in the modern equity environment.
- 3. Be able to understand and respond creatively to cross-border financial analysis in industrial sectors. To apply selectively traditional risk measures.
- 4. Have the ability to identify and discuss ethical issues affecting corporate operations and reporting.
ILO: Discipline-specific skills
- 5. the ability to develop rigorous theoretical arguments based on mathematical and analytical reasoning;
- 6. the ability rigorously to analyse problems in finance;
- 7. the ability to interpret financial data and problems in the light of established theories;
- 8. the ability to access a wide body of empirical research literature and critically appraise it;
- 9. the ability to use relevant databases, existing research literature and techniques to conduct a detailed investigation of problems arising in financial markets and models;
- 10. presentational skills
ILO: Personal and key skills
- 11. an ability to plan and manage his/her own study both individually and within a group;
- 12. an ability to make appropriate use of learning resources, including sophisticated computer datasets;
- 13. an ability to analyse critically problems arising in both academic and practical contexts;
Learning activities and teaching methods (given in hours of study time)
|Scheduled Learning and Teaching Activities||Guided independent study||Placement / study abroad|
Details of learning activities and teaching methods
|Category||Hours of study time||Description|
|Form of assessment||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Mock examination||2 hours||1- 13||Written feedback|
Summative assessment (% of credit)
|Coursework||Written exams||Practical exams|
Details of summative assessment
|Form of assessment||% of credit||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Examination||100||2 hours||1-13||Written feedback|
Details of re-assessment (where required by referral or deferral)
|Original form of assessment||Form of re-assessment||ILOs re-assessed||Timescale for re-assessment|
|Examination||Examination (100%) 2 hours||1-13||Aug/Sep|
• Foundation of valuation and discounted dividend valuation;
• Free cash flow valuation;
• Contemporary methods of operationalising the FCF model;
• Residual income valuation and accounting conservatism;
• The Ohlson model and forward earnings growth model;
• Intrinsic link between valuation and forecasting;
• The weighted average cost of capital and implied cost of equity capital;
• Forecasting of earnings and components;
• Value derivers and competitive strategy – Industry analysis; Company analysis and stock selection;
• Links between fundamental valuation model and price multiples;
• Market efficiency implications for investment analysis.
Indicative learning resources - Basic reading
CFA curriculum set plus: Required reading:
Palepu, K, P. Healy, V. Bernard, and E. Peek (2015), Business Analysis and Valuation, IFRS edition (3rd edition).
Copeland T, T Koller, J Murrin, McKinsey & Co Inc, 2013, Valuation-Measuring and Managing Value of Companies, 5th edition, Wiley
Lundholm R. and R. Sloan, Equity Valuation and Analysis, 2nd ed. 2014, McGraw-Hill Irwin
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