Equilest

JANUARY 7, 2025

When combined, they can paint a picture of a company that might be cooking its books faster than a chef in a Michelin-starred kitchen. A high M-Score could indicate higher risk, warranting a higher discount rate and thus a lower valuation. It's like adding a risk premium, but based on hard data rather than gut feeling.

Business Valuation 40

Business Valuation Risk Premium Finance Start-ups 40

Musings on Markets

JANUARY 27, 2022

Corporate Bonds: No Shortage of Risk Capital In my last post, I chronicled the movement in the equity risk premium, i.e. the price of risk in the equity market, during 2021, but the bond market has its own, and more measurable, price of risk in the form of corporate default spreads.

Risk-free Rate 99

Risk-free Rate Treasury Price to Book Start-ups 99

Musings on Markets

JANUARY 6, 2023

For example, I have seen it asserted that a stock that trades at less than book value is cheap or that a stock that trades at more than twenty times EBITDA is expensive. I do report on a few market-wide data items especially on risk premiums for both equity and debt. Price to Book 3. High-Low Price Risk Measure 5.

Risk Premium 52

Risk Premium Dividends Start-ups EBITDA 52

Musings on Markets

JANUARY 9, 2021

Consider, for instance, an investor who picks stocks based upon price to book ratios, who finds a stock trading at a price to book ratio of 1.5. buy stocks that trade at less than book value or trade at PEG ratios less than one) for individual stocks.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Equity 83

Equity Book Value Start-ups Corporate Finance 83

Musings on Markets

FEBRUARY 15, 2023

It is to remedy this defect that analysts scale profits to invested capital, with equity and capital variants: In the equity version, you divide net income by book equity to estimate a return on equity, a measure of what equity investors are generating on the capital they have invested in a company.

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

Musings on Markets

MAY 24, 2021

Risk Premiums and Failure Risk : By itself, inflation has no direct effect on equity risk premiums, but it remains true that higher levels of inflation are associated with more uncertainty about future inflation. Consequently, as inflation increases, equity risk premiums will tend to increase.

Treasury 56

Treasury Start-ups Risk Premium Price to Book 56

Valutico

FEBRUARY 13, 2025

Book a demo here to see how Valutico can help you. Interpreting beta values is crucial for investors to understand an asset’s risk exposure and its relationship with the overall market. Therefore, recalculating beta periodically or when significant events occur is advisable for accurate risk assessment.

Beta 52

Beta Covariance Risk-free Rate Specific Risk 52

Andrew Stolz

MARCH 20, 2020

The formula implies the return an investor expects from a risk-free investment plus the return from the stock in relation to market volatility. The market risk premium is calculated from a market rate of return less a risk-free rate. The formula is expressed in the following.

Beta 52

Beta Capital Structure Risk-free Rate Weighted Average Cost of Capital 52

Valutico

AUGUST 10, 2023

It needs to incorporate both the project risk and the opportunity cost, typically done using the CAPM method. However, market information required for CAPM, such as beta coefficients and risk premiums, may not be available for SMEs. Why not book your demo here to find out how Valutico can help you in valuing SMEs.

Discounted Cash Flow 52

Discounted Cash Flow Asset-based Approach Intangible Assets Business Valuation 52

Appraiser Newsroom

MAY 1, 2024

Insurance industry terminology such as risk, premium, loss, deductibles, coverage limits, and perils are some of the fundamental concepts appraisers must grasp. Different property insurance policies have unique features and limitations.

Appraisal 40

Appraisal Risk Premium Marketability 40

Musings on Markets

JULY 22, 2021

The second is the cost of capital, a number that most valuation classes and books (including mine) belabor to the point of diminishing returns. Finally, dismissing Zomato as an investment, just because it does not make money now, or fails to meet some conventional value tests on pricing (PE, Price to Book), is investing malpractice.

Marketability 99

Marketability Start-ups Equity Price to Book 99

Appraiser Newsroom

JUNE 4, 2024

He is a frequent presenter on valuation topics, and is currently a subject matter expert on the Appraisal Foundation’s working group preparing a Valuation Advisory on the Company-Specific Risk Premium. He specializes in the valuations of business enterprises and their intangible assets.

Business Valuation 59

Business Valuation Intangible Assets Appraisal Finance 59

Valutico

OCTOBER 20, 2022

Rf = Risk-free Rate. Rm – Rf) = Equity Market Risk Premium. Cp = Cost of Equity Premium. Try booking a demo , if this applies to you. The details of how the CAPM works is beyond the scope of this article but in short, the formula is as follows: Ce = Rf + B x (Rm – Rf) + Cp. Ce = Cost of Equity.

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Weighted Average Cost of Capital Net Present Value 52

Musings on Markets

JANUARY 19, 2022

The results are similar if you break stocks down based upon price to book ratios or revenue growth rates. The Implied ERP - Start of 2022 I have computed the implied equity risk premium at the start of every month, since September 2008, and during crisis periods, I compute it every day.

Risk Premium 99

Risk Premium Risk-free Rate Start-ups Equity 99

Musings on Markets

MARCH 19, 2022

The overriding message in all of this data is that Russia/Ukraine war has unleashed fears in the bond market, and once unleashed that fear has pushed up worries about default and default risk premia across the board.

Start-ups 100

Start-ups Risk Premium Equity Market Capitalization 100

Musings on Markets

FEBRUARY 27, 2023

An Optimizing Tool In my second and third data posts for this year, I chronicled the effects of rising interest rates and risk premiums on costs of equity and capital. Book versus Market : The book debt ratio is built around using the accounting measure of equity, usually shareholder's equity, as the value of equity.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

MARCH 25, 2021

Risk premiums No effect or even a decrease. Risk premia may rise as inflation increases, because higher inflation is almost always more volatile than low inflation. Riskfree rate will rise.

Equity 52

Equity Risk-free Rate Treasury Start-ups 52

Musings on Markets

APRIL 20, 2025

For the market, it is often built on papers (or books) that look at the historical data on what equity markets have delivered as returns over long periods, relative to what you would have made investing elsewhere. The evidence for this strategy comes from many sources. Contrarian Investing: The Psychological Tests!

Start-ups 137

Start-ups Price to Book Marketability Equity 137

Musings on Markets

FEBRUARY 23, 2025

Using this distinction, all interest-bearing debt, short term and long term, clears meets the criteria for debt, but for almost a century, leases, which also clearly meet the criteria (contractually set, limited role in management) of debt, were left off the books by accountants.

Equity 78

Equity EBITDA Risk Premium Gross Debt 78

Reynolds Holding

MARCH 25, 2025

14] Investment Company Institute, 2024 Investment Company Fact Book , at 22-23. [15] 17] See [link] (showing the United States has among the lowest equity risk premiums in the world); Luzi Hail and Christian Leuz, International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?,

Corporate Finance 45

Corporate Finance Finance Banking Marketability 45

Musings on Markets

FEBRUARY 6, 2025

The logical step in looking across countries is measuring risk in countries, and bringing that risk into your analysis, by incorporating that risk by demanding higher expected returns in riskier countries. The answers, to you, may seem obvious, but I find it useful to organize the obvious into buckets for analysis.

Risk Premium 69

Risk Premium Start-ups Enterprise Value Equity 69