Buy used: $6.97
$1 delivery February 13 - 16. Details
Used: Good | Details
Condition: Used: Good
Comment: Good clean copy with no missing pages might be an ex library copy; may contain some notes and or highlighting Accessories such as CD or codes, may not be included
Access codes and supplements are not guaranteed with used items.
Have one to sell?
Loading your book clubs
There was a problem loading your book clubs. Please try again.
Not in a club? Learn more
Amazon book clubs early access

Join or create book clubs

Choose books together

Track your books
Bring your club to Amazon Book Clubs, start a new book club and invite your friends to join, or find a club that’s right for you for free.
Kindle app logo image

Download the free Kindle app and start reading Kindle books instantly on your smartphone, tablet, or computer - no Kindle device required. Learn more

Read instantly on your browser with Kindle for Web.

Using your mobile phone camera - scan the code below and download the Kindle app.

QR code to download the Kindle App

Flip to back Flip to front
Listen Playing... Paused   You're listening to a sample of the Audible audio edition.
Learn more

Follow the Author

Something went wrong. Please try your request again later.

The Dark Side of Valuation: Valuing Old Tech, New Tech, and New Economy Companies 1st Edition

4.1 out of 5 stars 16 ratings

Price
New from Used from
Paperback
$6.97
$39.00 $2.50

There is a newer edition of this item:


Check out reading-themed apparel and accessories in the new Amazon Books merch shop

Editorial Reviews

Amazon.com Review

If the tech-stock swoon merely whets your appetite for this roller coaster of a market sector, and your eyes don't glaze over at the very sight of formulas like "Return on Capital = EBIT (1 - t) / Capital Invested," then The Dark Side of Valuation is the investment guide you've been waiting for. Whether considering New Economy firms at their peak or their valley, writes Aswath Damodaran, the problem has always been determining their true value with equitable dispassion. A leading expert on the topic, Damodaran begins by noting that standard corporate valuations are determined by four factors: cash flow from existing investments, growth expected from this cash flow, length of time this growth is sustained, and cost of capital to sustain it. In what he admits is not always an easy read, Damodaran then details various ways to adapt conventional valuation methods for companies that lack key traditional variables (such as profits, track records, and even competitors with which they can be compared) in order to arrive at realistic valuations. Those not scared off by charts comparing the historical risk for T-bills and T-bonds since 1928 will find this book worth a look. --Howard Rothman

From the Inside Flap

Preface

Do the old rules still apply? Do we need new valuation metrics, or are the old metrics flexible enough to deal with the companies that constitute the new economy? Can you value a company that has no earnings, no history, and no comparable firms? These are the questions that I have heard repeatedly over the last few years. I have always believed the fundamentals that determine value are the same, no matter what company you value and what market it is in. Increasingly, though, I have faced skeptical audiences who are unwilling to take this belief at face value and have demanded proof that America Online, Amazon, or Priceline can be valued with traditional models.

The genesis for this book was a paper I did on valuing Amazon in March 2000, where a discounted cash flow model yielded a value of $34 per share. Since the stock was trading at $80 at that time, there were many who viewed the valuation as either excessively pessimistic or as missing something. The interest in the paper led me to think about writing a book, but I expanded it to cover both new technology and old technology firms. While there are differences in estimation that arise across these firms, I believe that they have far more in common. Why technology firms? I believe that traditional valuation books and models (and I count my book on investment valuation among the culprits) have tended to concentrate on valuing manufacturing or traditional service firms. Technology firms are different. They expand by investing in research and through acquisitions and not by building plant and equipment. Many of them have astronomical growth rates in revenues and often, very little in current earnings. Their assets are often patents, technology, and skilled employees. I look at how the notions of capital expenditures, operating income, and working capital have to be redefined for these firms.

I begin this book by laying out the facts on the growth of technology and, in particular, new technology stocks in the equity market and argue that although the principles of valuation might not shift, the focus can change as firms move through their life cycles. This discussion is followed by an extended section (Chapters 2-7) on applying traditional discounted cash flow models to value technology stocks, with an emphasis on the estimation of cash flows, growth, and discount rates for these firms. In the next three chapters, I look at the use of relative valuation to value technology companies, both in terms of adapting existing multiples (such as price-earnings and price-to-sales ratios) and developing new ones (value per Web site visitor, for instance). In Chapter 11, "Real Options in Valuation," I consider an argument made by many for the large premiums paid on technology stocks (i.e., they represent real options to expand into a potentially huge e-commerce market), and consider some questions that a skeptic should ask before accepting this argument. In Chapter 12, "Value Enhancement," I consider how managers of technology firms can enhance the value of their firms through better investment and financing decisions.

The book is structured around the valuations of five technology firms-Motorola, Cisco, Amazon, Ariba, and Rediff. The first three are household names but represent three different points in the technology spectrum. Motorola is an old technology firm with substantial investments in existing assets. It is also a firm that has fallen on hard times in the last few years, largely as a consequence of poor investments and strategic choices. Cisco is one of the great success stories of the 1990s, but a great deal of the market value of the firm reflects expectations about the future. It is also a firm that has chosen to grow through acquisitions and has done it very well. Amazon is the poster child (for better or worse) for the new economy stocks that have entered the market in recent years, and the popular press has documented its ups and downs in extensive detail. Ariba and Rediff are more recent entrants into the new economy, with Ariba representing the promise (and peril) of the Business-to-Business (B2B) Internet model, and Rediff the potential of an Internet portal serving a market (India) that could be a huge market in the future.

One of the limitations of valuing real companies is that your mistakes are there on the printed page for all to see over time, but that prospect does not bother me. At the risk of giving away the punch line, I do find discounted cash flow values for all five companies: Motorola ($32.39), Cisco ($44.92), Amazon ($34.37), Ariba ($72.13), and Rediff ($19.05). For what it is worth, at the time that I did the valuations in June 2000, I found Amazon to be overvalued at $48 per share and Cisco to be overvalued at $64.88. Motorola at $34.25 per share and Ariba at $75 per share were fairly valued, and Rediff was significantly undervalued at $10 per share. By the time I finished the book, Amazon had dropped in value to $30 per share, and Cisco was trading at $51. Motorola had gone from being fairly valued to undervalued, Ariba saw its stock price double, and Rediff remained undervalued. I have no doubt that you will disagree with me on some of the inputs I have used, and the values that you assign these firms will be different from mine. What I would emphasize, therefore, is not the values that I arrive at for these firms, but the process by which I got there.

Finally, I want this book to be useful to a wide audience: individual investors who hold technology stocks in their portfolios, equity research analysts, venture capitalists, and managers at technology firms. There are portions of the book that I must confess are not easy reading, but I have tried as much as I can to provide an intuitive rationale for everything that I do. Technology firms, notwithstanding the back and forth of markets, are here to stay, and valuing them is something we all need to grapple with. I hope you find this book useful in that endeavor.

Product details

  • ASIN ‏ : ‎ 013040652X
  • Publisher ‏ : ‎ Ft Pr; 1st edition (January 1, 2001)
  • Language ‏ : ‎ English
  • Paperback ‏ : ‎ 479 pages
  • ISBN-10 ‏ : ‎ 9780130406521
  • ISBN-13 ‏ : ‎ 978-0130406521
  • Item Weight ‏ : ‎ 1.6 pounds
  • Dimensions ‏ : ‎ 6.25 x 1.25 x 9 inches
  • Customer Reviews:
    4.1 out of 5 stars 16 ratings

About the author

Follow authors to get new release updates, plus improved recommendations.
Brief content visible, double tap to read full content.
Full content visible, double tap to read brief content.

Aswath Damodaran is a professor of finance and David Margolis teaching fellow at the Stern School of Business at New York University. He teaches the corporate finance and equity valuation courses in the MBA program. He received his MBA and PhD from the University of California at Los Angeles. His research interests lie in valuation, portfolio management, and applied corporate finance. He has been published in the Journal of Financial and Quantitative Analysis, the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies. He has written three books on equity valuation (Damodaran on Valuation, Investment Valuation, and The Dark Side of Valuation) and two on corporate finance (Corporate Finance: Theory and Practice, Applied Corporate Finance: A User's Manual). He has coedited a book on investment management with Peter Bernstein (Investment Management) and has written a book on investment philosophies (Investment Philosophies). His newest book on portfolio management is titled Investment Fables and was published in 2004. He was a visiting lecturer at the University of California, Berkeley, from 1984 to 1986, where he received the Earl Cheit Outstanding Teaching Award in 1985. He has been at NYU since 1986 and received the Stern School of Business Excellence in Teaching Award (awarded by the graduating class) in 1988, 1991, 1992, 1999, 2001, and 2007, and was the youngest winner of the University-wide Distinguished Teaching Award (in 1990). He was profiled in Business Week as one of the top 12 business school professors in the United States in 1994.

Customer reviews

4.1 out of 5 stars
4.1 out of 5
16 global ratings

Top reviews from the United States

Translate all reviews to English
Reviewed in the United States 🇺🇸 on February 23, 2013
Reviewed in the United States 🇺🇸 on September 3, 2013
Reviewed in the United States 🇺🇸 on June 20, 2021
Reviewed in the United States 🇺🇸 on December 27, 2014
Reviewed in the United States 🇺🇸 on August 29, 2015
Reviewed in the United States 🇺🇸 on April 24, 2002
63 people found this helpful
Report abuse
Reviewed in the United States 🇺🇸 on November 9, 2001
34 people found this helpful
Report abuse
Reviewed in the United States 🇺🇸 on December 6, 2009
2 people found this helpful
Report abuse