APSN CFA 2013 Level 1 Study Session Equity Analysis and Valuation

This study session focuses on industry and company analysis and describes the tools used in forming an opinion about investing in a particular stock or group of stocks. This study session begins with the essential tools of equity valuation: the discounted cash flow technique and the relative valuation approach. These techniques provide the means to estimate reasonable price for a stock. The readings on industry analysis are an important element in the valuation process, providing the top–down context crucial to estimating a company’s potential. Also addressed is estimating a company’s earnings per share by forecasting sales and profit margins. The last reading in this study session focuses on price multiples, one of the most familiar and widely used tools in estimating the value of a company, and introduces the application of four commonly used price multiples to valuation.