FMP
Nov 28, 2023 6:51 AM - Parth Sanghvi
Discount rates are fundamental in Discounted Cash Flow (DCF) valuations, influencing a company's calculated intrinsic value. Two prominent models, the Weighted Average Cost of Capital (WACC) and the Capital Asset Pricing Model (CAPM), are integral in determining these rates. This article aims to demystify discount rates by delving into the significance of WACC and CAPM in DCF valuations, providing insights into their application and impact on valuation outcomes.
Discount rates represent the rate at which future cash flows are discounted to their present value. They account for the time value of money and a company's risk profile.
Understanding the significance of WACC and CAPM in determining discount rates is crucial for accurate DCF valuations. These models serve as fundamental tools in assessing a company's cost of capital and risk profile, ultimately shaping the calculated intrinsic value. Employing WACC and CAPM appropriately enables investors and analysts to derive more precise valuations, aiding in informed investment decisions.
Sep 11, 2023 1:38 PM - Rajnish Katharotiya
Price to Earnings is one of the key metrics use to value companies using multiples. The P/E ratio and other multiples are relative valuation metrics and they cannot be looked at in isolation. One of the problems with the P/E metric is the fact that if we are in the peak of a business cycle, earni...
Sep 11, 2023 1:49 PM - Rajnish Katharotiya
Price-to-Earnings ratio is a relative valuation tool. It is used by investors to find great companies at low prices. In this post, we will build a Python script to calculate Price Earnings Ratio for comparable companies. Photo by Skitterphoto on Pexels Price Earnings Ratio and Comparable Compa...
Oct 17, 2023 3:09 PM - Davit Kirakosyan
Shares of VMware (NYSE:VMW) witnessed a sharp drop of 12% intra-day today due to rising concerns about China's review of the company's significant sale deal to Broadcom. Consequently, Broadcom's shares also saw a dip of around 4%. Even though there aren’t any apparent problems with the proposed solu...