Valuation

Chapter kickoff

Valuation is one of my favorite chapters to teach, because it usually surprises folks how differently growth investors think about valuation. Even though valuation is a universal concept in corporate finance, it’s incredible how differently it can be applied! In these lessons, you’ll learn: Update for 2022/2023 market correction In 2022, there was a large […]

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4. Valuation framework – Growth vs. multiple compression

FAQ: How did I calculate exit value attributable to Growth, Multiple Compression, and Cash? These formulas are covered in the financial modeling section in greater detail, but here’s the summary: Note, in this case, we’re using “Revenue” as the valuation metric. If we were using EBITDA, replace Revenue with EBITDA in the above formulas. Also,

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7. Step #1 – Pick metric

FAQ: “Why not use entry multiples that are FURTHER into the future than the next twelve months (NTM)?” The main reason is that it’s really hard to predict what will happen in the distant future. Even experts find it challenging to forecast beyond a year, let alone five years or more. There’s a lot of

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6. Valuation process

FAQ: How do “traditional growth” and “venture-style growth” investors differ in their valuation approach? This is a great question. To discuss this, let’s divide the world of growth investors into two camps: In general, Traditional Growth investors place a greater emphasis on profitability, margins, and business model. They are likely to target businesses that are

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