Investment Analysis 2
This module involves developing and appraising critically a set of competing models of corporate valuation, including the dividend discount model (DDM), discounted free cash flows (FCFE) model, residual income model and their reconciliation. It covers forecasting of earnings and estimating of discount rate in valuation. It also establishes links between fundamental valuation models and value multiples. Finally, it discusses equity investment informed from firm’s fundamental analysis.
Research in Teaching
The whole module is informed by academic research, in particular by the module lead.
Full module specification
|Module title:||Investment Analysis 2|
BEAM032 Investment Analysis 1
|Duration of module:||
Duration (weeks) - term 2: |
Investment Analysis 2 aims to teach you various equity valuation techniques and apply them to the valuation of equities in major industrial sectors. This variety of geographic, industrial and other specialised circumstances requires careful selection of appropriate valuation methods and the interpretation of different standards of financial reporting and disclosure. This involves developing and appraising critically a set of competing models of corporate valuation. Ultimately, the aim is to give students the ability to produce equity research reports to professional standards.
ILO: Module-specific skills
- 1. apply selectively and critically 'new' value enhancement and valuation paradigms
- 2. explain the proper focus of investment analysis in the modern equity environment
- 3. perform and respond creatively to cross-border financial analysis in industrial sectors
- 4. apply selectively traditional risk measures
- 5. identify and discuss ethical issues affecting corporate operations and reporting
ILO: Discipline-specific skills
- 6. review and select appropriate analytical techniques
- 7. access and critically review research reports and other data sources
- 8. draw well-defined and supported conclusions when analysing a complex and specialised problem.
ILO: Personal and key skills
- 9. as an individual to present complex, technical reports.
- 10. plan and manage your own study
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|
|Scheduled learning and teaching activities||22||Lectures|
|Scheduled learning and teaching activities||11||Practical classes|
|Guided Independent Study||117||Reading, preparation for classes and assessments|
|Form of assessment||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Tutorial questions for discussion||1 hour in class discussion (2-3 hours preparation by students)||1-10||Tutor comments and suggested solutions|
|Mock examination||2 hours||1-10||Exam grade and written feedback on ELE|
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||1-10||Exam grade and written feedback on ELE|
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|
|Written examination (100%) (2 hours)||Written examination (2 hours) (100%)||1-10||August reassessment period|
• Equity valuation approaches and models, reconciliation of models, and contemporary methods of operationalising the FCF model
• A guest investment practitioner’s talk on corporate valuation or some other flexible arrangement
• Forecasting and business environment analysis including the Ohlson model and forward earnings growth model
• On the implied cost of equity capital
• Links between fundamental valuation model and value multiples
• Equity investment informed from firm’s fundamental analysis
• Revision and mock exam
Indicative learning resources - Basic reading
The module is mainly informed by academic research. A large part is based on the module instructor’s own research in the last twenty years.
- Koller, T., Goedhart, M., Wessels, D., Schwimmer, B., & Manoury, F. (2015). Valuation: measuring and managing the value of companies (6th ed.). Hoboken, N.J.: John Wiley & Sons.
- Palepu, K., Healy, P. Bernard, V. & Peek, E. (2015). Business analysis and valuation: IFRS edition (4th ed.). Andover: Cengage Learning.
Plus supplementary journal articles as directed
Other supplementary reading:
- Gregory, A. (2001). Strategic valuation of companies (2nd ed.). London: Financial Times/Prentice Hall.
- Lundholme, R., & Sloan, R. (2013). Equity valuation and analysis (3rd ed.). New York: McGraw-Hill Irwin.
- Penman, S. (2012). Financial statement analysis and security valuation (5th ed.). New York: McGraw Hill.
Module has an active ELE page?
Last revision date