valuing stocks evaluated from price to book method to price earnins and future earnngs projection as of 2024.

- Freecashflow method
- Pe Ratio
- Book value
- PEG ratio by peterlynch

## relative valuation model

- an attempt to measure
**relative value and not intrinsic value, reflect the current mood of the market**

- Price-to-earnings (PE)
- PEG Ratio- Price Earnings Growth
- Enterprise Value to EBITDA Ratio
- Price-to-book (PB) Value Ratio.
- Price/Sales Ratio
- Price-to-cash-flow (PCF):

- PCF ratio = Market price per common share/ Free cash flow per common share
- PS ratio = Market price per common share/ Sales per common share
- PB ratio = Market price per common share/ Book value per common share
- PEG ratio = PE Expected/ % annual growth
- PE ratio = Market price per common share/Earnings per common share
- EBITDA Ratio= EBITDA / Revenue

## Price to Book value

## Example: kotak bank share intrinsic value

**Market Price: 1,724.25 INR**

**DCF – By Revenue**: Fair value of 1855.52**DCF – By EBITDA**: Fair value of 1878.45**By EBITDA Multipl**e: Fair value of 1659.52**By Revenue Multiple:**Fair value of 1636.60**By Excess Return Model**: Fair value of 14.47**Peter Lynch FV**: Fair value of 1424.59

## Peter Lynch’s formula is:

Peter Lynch’s Fair Value = (Future EPS Growth Rate + **Dividend Yield**) / P/E Ratio

Less than a 1 is poor, and 1.5 is okay, but what you’re really looking for is a 2 or better. A Company with a 15 percent growth rate, a 3 percent dividend, and a p/e of 6 would have a fabulous 3.

= **Earnings Growth Rate x TTM EPS**

= 20.4 x 91.56

= 1,868.47

### Relative Valuation PE Multiples trailing & forward pe

Range | Selected | |

Trailing P/E multiples | 14.8x – 16.8x | 15.7x |

Forward P/E multiples | 12.6x – 14.6x | 13.7x |

Fair Price | 1,327.8 – 1,536.45 | 1,437.95 |

Upside | -22.8% – -10.7% | -16.4% |

## PEG Ratio Peter Lynch’s Fair Value Formula and the PEGy Ratio

PEGY Ratio = P/E Ratio / (Future EPS Growth Rate + Dividend Yield)

PEGY Ratio < 1.0: undervalued.

PEGY Ratio = 1.0: fairly valued.

PEGY Ratio > 1.0: overvalued.

## ebitda multiple valuation

EV/EBITDA multiple, is a financial ratio that compares a company’s **enterprise value** (EV) to its a**nnual earnings** before interest, taxes, depreciation, and amortization (EBITDA).

EV= Mcap+ Debt-Cash & cash equivalents

Mcap of Britannia Industries= Rs.89920crs

Debt on the balance sheet = 721.55+1075.70= Rs.1797crs

Cash on the balance sheet=Rs. 77.6crs

**EV= 89920+1797-77.6= 88045crs**

EBIDTA= Profits before exception items & Tax+ Finance Cost+ Depreciation expense- Other income

= 2379.44+97.81+166.77-292.70

= Rs.2351crs

Thus,

EV/EBIDTA= 88045/2351= **37.45x**

### EV/EBITDA good ratio

EV/EBITDA values **below 10 are** seen as healthy

## DCF analysis

DCF analysis can also be used to value a company and its equity securities by valuing** free cash flow to the firm (FCFF)** and **free cash flow to equity (FCFE**). Whereas dividends are the cash flows actually paid to stockholders, free cash flows are the cash flows available for distribution to shareholders.

FCFF= Cash flow from Operations – Net Investment in Long Term Assets

### Calculating Present Value Using Free Cashflow Approach

**step 1- Calculate the avg free cashflow- **So avg of FY21 & FY20 = Rs.1491.25crs

**Step 2- Identify the growth rate- **we can assume 15% for the first 5 years and around 10% for the next five years.

**Step 3- Estimating the future cashflow for next 10 years**

**Step 4- Calculate the Terminal Value**

terminal Value = FCF * (1 + Terminal Growth Rate) / (Discount Rate – Terminal growth rate)

**Step 5- Calculate the present value of these cashflows and the terminal value**

## Absolute Valuation discounted cash flow

determine the intrinsic value of an asset, irrespective of market conditions or relative comparisons.

Absolute value Stock = Absolute value Business / Number of outstanding shares

**Absolute Value = CF _{1}/(1+r)^{1} + CF_{2}/(1+r)^{2} + … + CF_{n}/(1+r)^{n} + Terminal Value/(1+r)^{n}**

**Absolute Value = ∑ ^{n}_{i=1} [CF_{i}/(1+r)^{i} + Terminal Value/(1+r)^{n}]**

Where,

- CF
_{i}= Cash flow in the i^{th}year - n = Last year of the projection
- r = Discount rate

- dividend discount model (DDM)
- discounted cash flow model (DCF)

## What is the difference between DCF and dividend discount model?

DDM: present-day price is worth the sum of all of its **future dividend payments** when discounted back to their present value.

DDM vs. DCF Valuation: What is the Difference? The dividend discount model (DDM) states that a **company is worth the sum of the present value (PV) of all its future dividends,** whereas the discounted cash flow model (DCF) states that a company is worth the sum of its **discounted future free cash flows** (FCFs).

### Vivekam fair price Expected market price

- Share price 200,
- TTM EPS 10,
- PE 20
- Insrirnic value set by market 120 60% of market price..
- Profit sensitive portion 80 rupees changes

### Vivekam fair value model. price 40% lower to market price* 200-80 =120

**Stock price = pe*eps**