Advanced Equity Valuation

Redcliffe Training Associates Ltd
Course summary
1 day
Next available date: Enquire for details - Worldwide
Corporate Training for Teams

Course description

Advanced Equity Valuation

Course Summary

This training covers the more advanced areas of Equity Valuation. Participants discuss complex issues such as a two-stage terminal value, valuation of net operating losses, WACC for private companies and issues in the reconciliation between enterprise and equity value (associates, non-controlling interests, operating leases, pension deficits).

Suitability - Who should attend?

Participants will:

  • Further enhance their understanding of Equity Valuation
  • Review the five steps of DCF valuation and the key issues affecting terminal value, WACC and enterprise value to equity reconciliation
  • Get an overview of advanced discounted cash flow valuation and fast growing companies and the use of multi-period terminal value and fade rates
  • Have explained to them stock options expenses including the essentials of stock based compensation accounting and the multiples adjustments (EV/EBIT)
  • Gain an understanding of the non-controlling interests and associates
  • Get to grips with the differences between operating and financing / capital leases and the fundamentals of operating and financing / capital lease accounting
  • Be introduced to Moody’s multiple method and present value of non-cancellable lease
  • Get an overview of fundamentals of pension accounting and the defined benefit vs. defined contribution plans
  • Understand better the finer details of weighted average cost of capital (WACC)

Course Content:

DCF and Multiple Valuation Reminder

  • Reminder of the five steps of DCF valuation
  • Review of trading multiples
  • Discussion of key issues affecting Terminal Value, WACC and Enterprise Value to Equity reconciliation

Advanced DCF Valuation

  • Fast growing companies and the use of multi-period terminal value and fade rates
    • Two-stage terminal value (growing annuity followed by a perpetuity growth rate)
  • Valuation of Net Operating Losses (NOLs)
  • Normalised steady-state cash flows to avoid abnormal terminal value
    • Use of target RoIC vs. WACC returns
  • Effective and marginal tax rates
  • Mid-year discounting on cash flows
  • Flexible valuation dates

Case studyIModelling of two-stage terminal value 

Modelling of NOLs, flexible deal dates and mid-year discounting

Weighted Average Cost of Capital (WACC)

  • Review of capital asset pricing mode (CAPM)
  • How to think about cost of equity for private companies
  • How betas are derived – regressing company and market returns
  • Which beta to choose for company valuation?
  • Why unlever betas? How do we unlever betas?
  • Use of Damodaran industry betas
  • Optimal capital structure and gearing risk

Case study IIUnlever and re-lever betas for a food manufacturing company

Enterprise Value to Equity Value IssuesStock Options Expenses

  • Essentials of stock based compensation accounting
    • Expensing to the income statement over the vesting period
  • Intrinsic value of stock based compensation
    • Treasury method of accounting for stock based compensation
  • Restricted stock and performance stock units
  • Multiples adjustments (EV/EBIT)
    • Fully diluted market capitalisation in EV
    • EBIT post stock option expense
  • DCF adjustments
    • Stock option expense to be included in FCF
    • Diluted share count to compute equity

Case studyIIIAnalysing the stock options of Linkedin

Non-Controlling Interests and Associates

  • Accounting for NCI
  • NCI valuation
    • Book values
    • Market values
    • P / E multiples, Price to Book multiples
  • Adjustments of NCI to multiples (EV/EBIT)
    • Include NCI at market value in EV
    • EBIT to include both parents and NCI earnings
  • Adjustments of NCI to DCF
    • Deduct NCI at market value from EV to reach Equity
  • Accounting for equity affiliates / associates
  • Equity affiliates and core, consolidated and total EV
  • Equity affiliate valuation
    • Book values/Market values/Multiples
  • Adjustments for equity affiliates to DCF and multiples
    • Depends on definition of EV (core, consolidated or total)

Case studyIVNestléandl’Oréalas associate

                           Nestléand NCI

Operating Leases

  • Differences between operating and financing / capital leases
  • Fundamentals of operating and financing / capital lease accounting
  • Moody’s multiple method and present value of non-cancellable lease arrangements
  • Operating leases adjustments to multiples
    • Capitalised operating leases to be added to EV
    • Rental expense to be allocated between interest expense and depreciation
  • Operating leases adjustments to DCF
    • Free cash flow post rental expenses
  • New accounting rules to abolish difference operating vs. finance leases

Case study VComputing Easyjet adjusted EV/EBITDAR


  • Fundamentals of pension accounting
  • Defined benefit vs. defined contribution plans
  • Funded vs. unfunded plans
  • Pension deficits and surpluses
  • Pension adjustments to multiples
    • Add pension deficit to enterprise value
    • Only service costs to remain in EBIT
  • Pension adjustments for DCF
    • Only service cost in EBIT/free cash flow
    • Deduct pension deficit from EV to equity

About provider

Redcliffe Training is a full service finance training provider that specialises in enhancing your employees technical skills in Investment Banking, Corporate Finance, Debt & Leveraged Finance, Corporate Law, Real Estate Finance, Project Finance, Soft Skills, Compliance, Accounting, Financial Modelling &...

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Redcliffe Training Associates Ltd

16 Upper Woburn Place
WC1H 0BS London

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