Analysis of Equity Investments: Valuation (Hardcover)

~ John D. Stowe (Author), Thomas R. Robinson (Author), Jerald E. Pinto (Author), Dennis W. McLeavey (Author) "Every day thousands of participants in the investment profession-investors, portfolio managers, regulators, researchers-face a common and often perplexing question: What is the value of a..." (more)
Key Phrases: residual income model, beginning book value, only noncash charge, United States, Value Line, Pitts Corporation (more...)

Editorial Reviews

Product Description

The treatment in Analysis of Equity Investments: Valuation is intended to communicate a practical equity valuation process for the investment generalist. Unlike many alternative works, the book integrates accounting and finance concepts, providing the evenness of subject matter treatment, consistency of notation, and continuity of topic coverage so critical to the learning process.

The book does not simply deliver a collection of valuation models, but challenges the reader to determine which models are most appropriate for specific companies and situations. This book contains many real-life worked examples and problems with complete solutions. In addition, the examples and problems reflect the global investment community.

Chapter 1 describes how an analyst approaches the equity valuation process.

Chapter 2 begins with the basic John Burr Williams dividend discount model (DDM) and discusses the derivation of the required rate of return within the context of Markowitz and Sharpe’s modern portfolio theory (the capital asset pricing model).

Chapter 3 shows how the DDM approach can be modified to a free cash flow (FCF) approach. Considerable attention is devoted to forecasting FCF and its relationship both to the firm (FCFF) and to equity (FCFE).

Chapter 4 takes a somewhat different approach to equity valuation by using Graham and Dodd–type concepts of earning power and associated "Market Multiples." The most familiar of these is probably the price-to-earnings ratio, but there is also merit to using price to book value, price to sales, price to cash flow, enterprise value to EBITDA, and price to dividends.

In Chapter 5, the authors present residual income models. The authors demonstrate how to calculate residual income and discuss the accounting adjustments necessary to estimate single-stage and multistage residual income valuation.

About the Author

John D. Stowe, Ph.D., CFA is a Professor of Finance and Associate Dean at the University of Missouri-Columbia where he teaches investments and corporate finance. He earned the CFA charter in 1995. He has served on the Candidate Curriculum Committee, the Council of Examiners, and in other voluntary roles at AIMR, and is a member of the Saint Louis Society of Financial Analysts. He has won several teaching awards and has published frequently in academic and professional journals in finance. He is a co-author of a college-level textbook in corporate finance. He earned his B.A. from Centenary College and his Ph.D. in economics from the University of Houston.

Thomas R. Robinson, Ph.D., CPA, CFP, CFA is an Associate Professor of Accounting at the University of Miami where he primarily teaches Financial Statement Analysis. Professor Robinson received his B.A. in economics from the University of Pennsylvania and Master of Accountancy from Case Western Reserve University. He practiced public accounting for ten years prior to earning his Ph.D. in accounting with a minor in finance from Case Western Reserve University. He has won several teaching awards and has published regularly in academic and professional journals. He is currently Senior Investment Consultant for Earl M. Foster Associates, a private investment management firm in Miami, and previously served as a consultant on financial statement analysis and valuation issues. Professor Robinson is active locally and nationally with AIMR and has served on several committees including AIMR’s Financial Accounting Policy Committee. He is past president and a current board member of the Miami Society of Financial Analysts.

Jerald E. Pinto, CFA, as principal of TRM Services, consults to corporations, foundations, and partnerships in investment planning, portfolio analysis, and quantitative analysis. Mr. Pinto previously taught finance at the NYU Stern School of Business after working in the banking and investment industries in New York City. He is a co-author of AIMR’s text, Quantitative Methods for Investment Analysis. He holds an MBA from Baruch College and a Ph.D. in finance from the Stern School. During the writing of this book, Mr. Pinto was a Visiting Scholar at AIMR.

Dennis W. McLeavey, CFA is a Vice President in the Curriculum and Examinations Department at AIMR. He earned his CFA charter in 1990. During the early 1990s, he taught in the Boston University and the Boston Security Analysts’ CFA review programs. He subsequently served on the AIMR Council of Examiners and is now responsible for new curriculum development at AIMR. He is a co-author of AIMR’s text, Quantitative Methods for Investment Analysis. After studying economics for his bachelor’s degree at the University of Western Ontario in 1968, he completed a doctorate in production management and industrial engineering at Indiana University in 1972.

(Foreword) George H. Troughton, Ph.D., CFA is a Professor of Finance at California State University, Chico. He was formerly Professor of Finance at Babson College in Wellesley, MA. He has also worked as an equity analyst at Lehman Brothers and Scudder, Stevens and Clark. He has served in numerous capacities at AIMR including the Candidate Curriculum Committee, the Council of Examiners, and the Editorial Board of The CFA Digest. In 1999 he was recipient of the C. Stewart Sheppard Award for the advancement of education in the investment profession. Professor Troughton holds an AB from Brown University, an MBA from Columbia University, and a Ph.D. in finance from the University of Massachusetts-Amherst.

Product Details

• Hardcover: 318 pages
• Publisher: Assn for Investment Management & (August 1, 2002)
• Language: English
• ISBN-10: 0935015760
• ISBN-13: 978-0935015768
• Product Dimensions: 9.9 x 8.1 x 1 inches
• Shipping Weight: 2.1 pounds
• Average Customer Review: 3.5 out of 5 stars  See all reviews (2 customer reviews)
• Amazon.com Sales Rank: #545,998 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

3 of 3 people found the following review helpful:

5.0 out of 5 stars Must-have reference for students!, July 25, 2007

By	Winston Kotzan (Chicago) - See all my reviews

As an undergraduate Finance student prepping for the C.F.A. exam, I must say this is the best textbook I have seen on valuing equities. Clearly written by experienced C.F.A.'s, this guide to valuation has been more helpful and easier to use than any of the textbooks used in my finance classes.

It is well organized, making it easy to read as a single pass-through and to use as a reference for specific topics. The best thing about its writing style is the plentiful examples. Pages of practice problems and step-by-step demonstrations leave the reader with no misunderstanding of the material.

Some important topics covered include methods of valuation (discounted dividend, discounted cash flow, multiples, and the less popular residual income), methods of obtaining discount rates/required return, and other helpful information such as how analyst research reports are structured. Each topic is covered in great detail, encompassing just about every aspect an analyst should know and more. Do not expect to remember everything - I suggest building your own spreadsheet models using this book as a reference to help reinforce the information.

If you are a college student or studying for the C.F.A., this is a necessary book to have in your arsenal. If will provide clarity where other books do not suffice.

2.0 out of 5 stars Late with bent cover, June 15, 2009

By	Adrian Van Poppel (San Francisco, CA) - See all my reviews (REAL NAME)

I paid extra for faster shipping but after not receiving it within the LARGE window given I sent a msg to the company but got no response. It finally came the day I sent an email to Amazon to get my money back.