Valuation of Palm, Inc. Case Study: Human Factors and Heuristics in Palm, Inc.’s Valuation.

Slides:

Advertisements

Similar presentations

Equity Valuation Models

Advertisements

The Value of Common Stocks. Topics Covered  How Common Stocks are Traded  How To Value Common Stock  Capitalization Rates  Stock Prices and EPS 

Common Stock Valuation

Equity Valuation CHAPTER 12.

Common Stock Valuation

1 FIN 2808, Spring 10 - Tang Chapter 18: Equity Valuation Fin2808: Investments Spring, 2010 Dragon Tang Lectures 13 & 14 Equity Valuation Models March.

FIN352 Vicentiu Covrig 1 Common Stock Valuation (chapter 10)

PEG Ratio – By Prof. Simply Simple The PEG Ratio or ‘Price Earnings to Growth’ Ratio determines a stock’s value while taking into account future earnings.

INVESTMENTS: Analysis and Management Second Canadian Edition INVESTMENTS: Analysis and Management Second Canadian Edition W. Sean Cleary Charles P. Jones.

McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Equity Valuation CHAPTER 13.

Chapter 13 Common Stock Valuation Name two approaches to the valuation of common stocks used in fundamental security analysis. Explain the present value.

Stock and Its Valuation

Common Stock Valuation

Equity Valuation Models Chapter 18. Basic Types of Models - Balance Sheet Models - Dividend Discount Models - Price/Earning Ratios Estimating Growth Rates.

The McGraw-Hill Companies, Inc., 2000

Copyright © 2006 McGraw Hill Ryerson Limited6-1 prepared by: Sujata Madan McGill University Fundamentals of Corporate Finance Third Canadian Edition.

Lecture 7 The Value of Common Stocks Managerial Finance FINA 6335 Ronald F. Singer.

Fall-02 Investments Zvi Wiener tel: Equity Valuation Methods BKM Ch.

The Value of Common Stocks Chapter 4. Topics Covered  How Common Stocks are Traded  How To Value Common Stock  Capitalization Rates  Stock Prices.

Review Bond Yields and Prices.

CHAPTER EIGHT Practical Investment Management Robert A. Strong VALUATION TOOLS N 5 8.

Stock Valuation Adam Yoder Misa Ngo. Valuation methods  Discounted Cash Flow: Dividends  Present Value of Growth Opportunities  P/E ratio: Price/ Earnings.

The Value of Common Stocks

FIN 819: lecture 2'1 Review of the Valuation of Common Stocks How to apply the PV concept.

Investment Planning Investment Planning Valuation of a Firm April 16, 2015 Vandana Srivastava.

Chapter 13 Equity Valuation

1 Chapter 10 Equity Valuation Tools Portfolio Construction, Management, & Protection, 5e, Robert A. Strong Copyright ©2009 by South-Western, a division.

CHAPTER 18 Investments Equity Valuation Models Slides by Richard D. Johnson Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved McGraw-Hill/Irwin.

Chapter 13 Equity Valuation 13-1.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc. All rights reserved. 1 1 Fundamentals of Investment Management Hirt Block 1 Basic Valuation Concepts.

The value of common stocks

FIN 351: lecture 4 Stock and Its Valuation The application of the present value concept.

Chapter 18 Equity Valuation. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Fundamental Stock Analysis: Models of Equity.

©2012 McGraw-Hill Ryerson Limited 1 of 34 Learning Objectives 4.Calculate the yields on financial claims based on the relationship between current price.

McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Equity Valuation CHAPTER 13.

Chapter 12 Equity Valuation. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Fundamental Stock Analysis: Models of Equity.

Valuation Part 3 Presented by: Wee Yang Yale-NUS Investment Masterminds Discounted Cash Flow Model.

Chapter 7 Valuing Stocks TOPICS COVERED Stocks and the Stock Market Valuing Common Stocks Simplifying the Dividend Discount Model Growth Stocks and Income.

Equity Valuation VALUATION BY COMPARABLES  Basic Types of Models ◦ Balance Sheet Models ◦ Dividend Discount Models ◦ Price/Earnings Ratios.

Common Stock Valuation

Chapter 4 Principles of Corporate Finance Eighth Edition Value of Bond and Common Stocks Slides by Matthew Will Copyright © 2006 by The McGraw-Hill Companies,

SESSION 15: PE RATIOS Aswath Damodaran 1. 2 Price Earnings Ratio: Definition Aswath Damodaran 2 PE = Market Price per Share / Earnings per Share  There.

Essentials of Investments © 2001 The McGraw-Hill Companies, Inc. All rights reserved. Fourth Edition Irwin / McGraw-Hill Bodie Kane Marcus 1 Chapter 13.

Investment Management © 2008 Equity Valuation Models Lectured by Chandra Wijaya.

McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 2 VALUATION Behavioral Corporate Finance by Hersh Shefrin.

12-1 McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. CHAPTER 12 Equity Valuation.

Evaluation Technique Fig. 2. Survey evidence on the popularity of different capital budgeting methods. We report the percentage of CFOs who always or almost.

Chapter 13 Equity Valuation Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.

 The McGraw-Hill Companies, Inc., 1999 INVESTMENTS Fourth Edition Bodie Kane Marcus Irwin/McGraw-Hill 18-1 Equity Valuation Models Chapter 18.

Chapter 13 Equity Valuation Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.

McGraw-Hill/Irwin © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. Equity Valuation CHAPTER 12.

Chapter 5 Principles PrinciplesofCorporateFinance Ninth Edition The Value of Common Stocks Slides by Matthew Will Copyright © 2008 by The McGraw-Hill Companies,

Chapter 5 Principles PrinciplesofCorporateFinance Concise Edition The Value of Common Stocks Slides by Matthew Will Copyright © 2009 by The McGraw-Hill.

Valuation Fundamentals

Common Stock Valuation

PEG Ratio – By Prof. Simply Simple

PEG Ratio – By Prof. Simply Simple

Chapter 4 The Value of Common Stocks Principles of Corporate Finance

Equity Valuation Models

L8 – Valuation of Shares BBK34133 | Investment Analysis

Chapter 13 Equity Valuation.

Fundamentals of Investments

Common Stock Valuation

Common Stock Valuation

CHAPTER 13 Equity Valuation.

Lecture 4 The Value of Common Stocks

Valuation by Comparables

Common Stock Valuation Chapter 9

Behavioral Corporate Finance

Investments: Analysis and Management Common Stock Valuation

Presentation transcript:

Valuation of Palm, Inc. Case Study: Human Factors and Heuristics in Palm, Inc.’s Valuation

Could Palm be undervalued?  Fundamental value per share of $36.99 utilizing the traditional discounted cash flow approach.  The present value of growth opportunities (PVGO) method projects fundamental value per share of $  Giving equal weight to both methods results in a projected value of $  This exceeds Palm’s market price per share of $21.69.

P/E Ratio P/E Ratios  Market P/E ratio: 145  Fundamental P/E ratio: 72.5  Fundamental P/E ratio using PVGO: Meaning  Lower Fundamental P/E ratio than other methods.  Indicates market using lower ROE in calculations.

Palm, Inc v. the market  Palm, Inc.’s self valuation suggests undervalued stock.  Is the market wrong in its valuation?  Palm used trailing P/E ratio instead of the appropriate forward P/E ratio.  Palm made questionable decision not to use PEG ratio, given anticipated growth.  Palm relied on valuation heuristics rather than discounted cash flow methods.

Human factors?  Values used to calculate the P/E ratio & price-to-sales ratios more readily available than those needed to use discounted cash flow techniques.  Excessive optimism in anticipated 26% ROE.  Achoring and adjustment possible contributor.

Recommendations for effective valuation  Support more intuitive valuation techniques with discounted cash flow analysis.  Remain aware of biases.