Uploaded April 2025 | Updated September 2026, 1 week ago
During thisclass, we started by continuing to examine how to deconstruct multiples to determine what drives each multiple, using an intrinsic value model as a starting point and employing algebra for two reasons:
1. It yields a construct for creating your perfect cheap company (low PE, high growth, low risk, high payout etc.) that you can then use as a basis for screening fo cheap stocks. In fact, I have a generic post on screening built around this:
aswathdamodaran.blogspot.com/2012/06/passive-value-investing-screening-for.html
2. It gives you questions you can ask, when presented with a stock to buy or sell, based upon a pricing. (This company is cheap because it trades at 4 times EBITDA, for example…)
3. It yields insight into each multiple’s companion variable, the one number you need to know to use a multiple well. (PE (growth), PBV (ROE), EV/Sales (Operating margin)
While the examples that I used in class are dated, they were meant to illustrate this process, and how statistics can be used as a tool.
Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/relval2btest.pdf
Slides: nyu.box.com/s/vb7rgx0akt21k5crcwwos9n0cq948wip
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Ctest.pdf
Post class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Csoln.pdf
During thisclass, we started by continuing to examine how to deconstruct multiples to determine what drives each multiple, using an intrinsic value model as a starting point and employing algebra for two reasons:
1. It yields a construct for creating your perfect cheap company (low PE, high growth, low risk, high payout etc.) that you can then use as a basis for screening fo cheap stocks. In fact, I have a generic post on screening built around this:
aswathdamodaran.blogspot.com/2012/06/passive-value-investing-screening-for.html
2. It gives you questions you can ask, when presented with a stock to buy or sell, based upon a pricing. (This company is cheap because it trades at 4 times EBITDA, for example…)
3. It yields insight into each multiple’s companion variable, the one number you need to know to use a multiple well. (PE (growth), PBV (ROE), EV/Sales (Operating margin)
While the examples that I used in class are dated, they were meant to illustrate this process, and how statistics can be used as a tool.
Start of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/relval2btest.pdf
Slides: nyu.box.com/s/vb7rgx0akt21k5crcwwos9n0cq948wip
Post class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Ctest.pdf
Post class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session21Csoln.pdf
