The Little Book of Valuation

Do you know what a share in Google, Tesla or NVidia is really worth?What about that condo or house you just bought? Should you care?

Knowing the value of a stock, bond, or property may not be a prerequisite for successful investing, but it does help individual investors like you make more informed judgments.

Most investors see valuing an asset as a daunting task—something far too complex and complicated for their skill sets. Consequently, they leave it to the professionals (equity research analysts, appraisers) or ignore it entirely. I believe that valuation, at its core, is simple and anyone who is willing to spend time collecting information and analyzing it, can do it. I hope to show you how in this book. I also hope to strip away the mystique from valuation practices and provide ways in which you can look at valuation judgments made by analysts and appraisers and decide for yourself whether they make sense or not.

While valuation models can be filled with details, the value of a company rests on a few key drivers, which may vary from company to company. In the search for these value drivers, I will look not only across the life cycle from young, growth firms such as Zomato, an Indian online food delivery company, to mature companies like Unilever, but also across diverse sectors from commodity companies like Royal Dutch to financial service companies like Citigroup. In a webpage to accompany this book and on a mobile app, you can not only look at the spreadsheets containing these valuations, but you can also change or update the numbers and see the effects. In addition, the webpage gives you access to more resources that you can use, if you want to dig deeper.

Here is the bonus: if you understand the value drivers of a business, you can also start to identify value plays: stocks that are investment bargains. By the end of the book, I would like you to be able to assess the value of any company or business that you are interested in buying and use this understanding to become not only a more informed investor but also a more successful one. Will that make you a successful investor or earn you riches? Not necessarily, but it will give you the tools to avoid investing mistakes and to spot investment scams.