Year 3 · Applied Finance · Advanced Valuation
Advanced Valuation
Move beyond mechanical DCFs and trading multiples. Learn how professionals normalize earnings, choose the right cash-flow framework, stress terminal value, value complex businesses and turn valuation into an investment or deal decision.
LEARNING OBJECTIVES
What you should be able to explain after this lesson
01
Normalize reported earnings and cash flow before applying valuation methods.
02
Choose between FCFF, FCFE, dividend, residual-income and asset-based frameworks.
03
Estimate and challenge WACC, cost of equity and capital-structure assumptions.
04
Build defensible terminal-value assumptions using growth and exit-multiple methods.
05
Use trading comps, transaction comps and SOTP while controlling for business mix and accounting differences.
06
Value cyclical, high-growth, financial and multi-segment companies with appropriate adjustments.
07
Convert valuation ranges into an investment, financing or transaction conclusion.
CONCEPT MAPFrom reported numbers to decision-ready valuation
Valuation starts by separating sustainable economics from reported accounting
CORE FACTS · SAME IN EVERY MODE
Reported earnings can contain one-off gains, restructuring charges, unusual litigation, temporary tax effects or acquisition accounting.
Normalization asks what revenue, margins, taxes, capex and working capital should look like on a sustainable basis.
An adjustment is useful only when it improves comparability or forecasts future economics more accurately.
Repeated 'one-off' costs may be economically recurring and should not automatically be added back.
BeginnerTeaching style changes, knowledge does not.
Before valuing a company, clean the numbers. If a company sold a building for a large gain, that gain does not mean its normal business suddenly became more profitable.
PROFESSIONAL VOCABULARYNormalized earnings / résultats normalisés Add-back / add-back Quality of earnings / quality of earnings
Estimate of sustainable recurring profitability after removing distortions.
Expense added back to reported profit when judged non-recurring or non-economic for the valuation purpose.
Degree to which reported profit reflects durable, cash-generative economics.