|
|
|
1. Valuation of bond |
|
Determing cost of capital (as additional
info, not in main outline) |
|
Determing EVA-calculation (as additional
info, not in main outline) |
|
2. Analogy between bond and company valuation |
|
3. Detailed examples of EVA-valuation |
|
4. Live Examples of EVA-valuation (graphs from150
Finnish comp.) |
|
5. EVA and DCF valuation analogy |
|
|
|
Graphical index of this presentation (slide
thumbnails) |
|
|
|
|
|
|
”The price paid for any asset should reflect the
cash flows that asset is expected to generate”. E.g. ordinary government bond, with 5 years maturity and 5%
coupon rate is valued in a following manner as the market interest rate is
5%: |
|
|
|
|
Example how the bond value changes as interest
rate rises from 5% (last page) to 10% (this page). |
|
|
|
|
|
|
|
In principle the valuation of a bond and a
valuation of a company is the same: |
|
You discount the future cash-flows into present,
sum them up and thus get the bond/company value |
|
OR: you
calculate how much the company/bond earns above or below its opportunity
cost (cost of capital) , discount these values to present and add this to
or subtract this from the book value |
|
We see the latter method more illustrative and
practical with company valuation and thus the following pages will
demonstrate how to use this method in theory and in practice. |
|
We call the difference between company’s return
and its capital costs with the name “EVA” (Economic Value Added) which is
often called also Residual Income or Economic Profit as the term EVA is
registered trademark of Stern Stewart & Co. |
|
|
|
=> Click here for additional info about how opportunity
cost (cost of capital) is calculated in company valuation (4 slides) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following examples (50 pages) from Finnish
companies are from Valuatum Platfrom |
|
Data is from Mandatum Stockbrokers |
|
|
|
|
|
|
|
|
|
|
|
|
|
This page should forward you to the page 1/50 of
the EVA-MVA –graphs of Finnish companies. |
|
If not, please click here |
|
|
|
|
|
The previous 50 slides of company EVA/MVA
examples were taken from live Valuatum Platform (with the permission of
Mandatum Stockbrokers as they own this data in question) |
|
Valuatum Platform includes e.g. comprehensive
valuation models for each followed company (each model includes 9000
parameter/company) and those models can be manipulated by end-users
(investors) who can also store the models and thier own scenarios locally |
|
And any piece of this data can be presented with
illustrative graphs and tables (of which these EVA-MVA graphs were one
example of the thousands possible) |
|
Valuatum sells this product for research focused
stockbrokers to enable the delivery of their own data to their
institutional customers |
|
Also historical estimate data is collected which
enables interesting comparisons |
|
|
|
More info from Valuatum Platform can be found
behind these links: |
|
Demo version of ValuViews (tables and graphs) (old
data) |
|
Screenshots from ValuModel (company valuation
model) |
|
End-user comments |
|
More info about the product |
|
|
|
You can also get free trial for the real-version
(current data) behind this link |
|
|
|
|
|
|
|
Two different expressions from the same thing: |
|
EVA-valuation produces exactly same valuation
(fair value) as DCF |
|
Actually in EVA valuation the book value of
equity is off no meaning: the bigger book value, the bigger capital costs
and thus the smaller EVA (what is
left and what only has meaning to valuation is cash-flow) |
|
EVA is only another way (a more illustrative
way) to calculate DCF valuation |
|
|
|
|
|
|
|
|
|
|
|
EVA-valuation has thus theoretically nothing
new, but… |
|
It is very illustrative, especially with
traditional companies with slow growth |
|
Easy to calculate straight from the EBIT, even
one individual year describes often the situation well unlike cash-flow in
individual year |
|
At its best as it forces to take the invested
capital into account. Especially the sell-side analyst tend to focus on
income statement and not on balance sheet. And as you calculate the value
of the company without required attention to capital requirements in the
long run, you normally overestimate the value of the company… |
|
Muistiinpanot