财务报表分析与证券估值英文课件 (7)

Reverse Engineering the S&P 500, May 2011
Inputs: Index level: 1357 Book value: 588 P/B: 2.3 B/P: 0.435 Forward Earnings (for the next year) $98.76 Long-term treasury rate: 3.3% Risk premium: 5.7%
CHAPTER SEVEN
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Prepared by: Stephen H. Penman – Columbia University With contributions by
Value = Value based on what we know + Speculative value
(1)
(2)
(1) Value based on what we know is the no-growth valuation
= $143.92 + $215.62 = $359.54
(2) Speculative value is the value from speculating about growth = Market price – No-growth value = $535 - $359.54 = $175.46
The Big Picture for this Chapter
• Don’t take valuation models literally üUse valuation models to challenge the market price rather than for calculating intrinsic value üUse valuation models to convert the market price to a forecast – then challenge that forecast
A Formula for the Expected Return
The Expected Return is a weighted average of the forward ROCE and growth, where the weights are given by book-to-price (B/P) Note! ER is the expected return to buying at the current market price, not the required return
What You Will Learn From This Chapter
• Reverse engineer the market price to ascertain the market’s earnings forecasts
• Plot the future earnings growth path that is implicit in the market price
The Building Blocks of the Market: Valuation of Google
Market price = $535 in May 2011
The Implied Growth Rate: Google
Solution for g: 1.047 (a 4.7% growth rate)
Active investing finesses these issues
A Reminder: Principles of Fundamental I what you know with speculation • Anchor a valuation on what you know rather than speculation • Beware of paying too much for growth
Converting a Residual Earnings Growth Rate to an EPS Growth Rate
Plot of forecasted growth rates:
Nir Yehuda – Northwestern University Mingcherng Deng – University of Minnesota Peter D. Easton and Gregory A. Sommers – Notre Dame and Southern
Methodist Universities Luis Palencia – University of Navarra, IESE Business School
ü Building a required return into a valuation puts speculation into the calculation
• We do not know the long-term growth rate
ü Building a growth rate into a valuation is speculative
• Investing is not a game against nature, rather a game against other investors üTherefore, use valuation models to play the game against other investors
• Calculate the expected return from buying at the current market price
• Evaluate the current level of a stock market index like the S&P 500
• Challenge the market price of a stock • Take the first steps in engaging in active listening
Forward ROCE = 98.76 / 588 = 16.8% Required Return = 3.3% + 5.7% = 9%
Reverse Engineering the S&P 500, May 2011 (cont.)
1. The implied growth rate:
g = 1.03 (a 3% growth rate) If one expects the historical GDP growth rate of 4%, the S&P 500 is cheap. 2. The implied expected return:
Value = Anchoring value + Extra value = Value based on what we know + Speculative value
Challenging the Market Price: Reverse Engineering the Growth Rate
Common Misconceptions About Valuation
• The idea of “intrinsic value” is not useful
ü Don’t pretend that you can calculate a precise intrinsic value
• We do not know the required return
The Simple Example of Chapter 5
If price = $133.71, then
Solve for g: g = 1.03, or a 3% growth rate
Challenging the Market Price: Reverse Engineering the Expected Return
If one requires a 9% return to invest in the S&P 500, the index is cheap.
Challenging the Market Price: Google Inc, May 2011
Price: $535 Book value: $143.92 Analysts’ EPS forecast for 2011: $33.94 Analysts’ EPS forecast for 2012: $39.55 Required return: 10%
The Simple Example of Chapter 5
If price = $133.71 and one forecasts a growth rate of 3%, then
P0

$133.71

$100

2.36 ER 1.03
Solve for ER: ER = 1.10 (a 10% expected return)