Valuation Techniques: Forecasting, and Performance Analysis

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Provider

Coursera
Pricing

Paid Course
Languages

English
Certificate

Certificate Available
Effort

18 weeks, 1 hour a week
Sessions

Self-Paced
Level

Intermediate
Subtitles

English

Found in

Part of

Corporate Valuation and Financial Analysis

Overview

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Delve into advanced valuation methodologies, including discounted cash flow models, financial statement analysis, forecasting, and performance measurement. Build expertise in applying rigorous valuation frameworks to assess company value and financial health. This course covers the practical application of valuation models, such as economic profit-based and adjusted-present-value approaches, and guides learners through reorganizing financial statements for analysis. Topics include forecasting company performance, estimating continuing value, calculating the cost of capital, and moving from enterprise value to value per share. Learners will also explore scenario analysis, the use of multiples, and valuation by business segments, equipping them with the tools to conduct comprehensive company valuations. Through a blend of conceptual explanations and applied financial analysis, the course enables learners to master valuation techniques and interpret financial data. Interactive content and assessments support the development of analytical skills essential for effective valuation. This course is part two of a three-course Specialization designed to provide a comprehensive learning pathway in this subject area. Learners are encouraged to complete part 1 before they undertake this course. From Valuation Copyright © 1990, 1994, 2000, 2005, 2010, 2015, 2020 by McKinsey & Company. All rights reserved. Used by arrangement with John Wiley & Sons, Inc.

Syllabus

Frameworks for Valuation

This module explores key valuation frameworks used to assess company value, including discounted cash flow (DCF), economic profit-based models, and the adjusted-present-value (APV) approach. Learners will discover how to value both operating and nonoperating assets, account for capital structure effects like tax shields, and recognize common pitfalls in valuation methods. By the end, you'll be equipped to apply these models to real-world corporate valuation scenarios.

Reorganizing the Financial Statements

This module guides learners through reorganizing traditional financial statements to better assess a company's operating performance and value. You will explore key concepts such as free cash flow, invested capital, and NOPAT, and learn how to reconcile these figures for a comprehensive financial analysis. The module also covers advanced adjustments, including the treatment of operating leases and industry-specific items.

Analyzing Performance

This module guides learners through the process of evaluating a company's historical performance by examining key financial metrics such as return on invested capital (ROIC), revenue growth, and capital structure. Learners will explore how to decompose ROIC, analyze revenue trends, assess the impact of accounting changes, and interpret valuation metrics. By the end, participants will be equipped to assess a company's economic health and value drivers.

Forecasting Performance

This module guides learners through the step-by-step process of building integrated financial forecasts, including revenue, income statement, and balance sheet projections. Learners will develop spreadsheet modeling skills, understand the logic behind forecasting key financial statements, and address advanced forecasting challenges such as nonfinancial drivers and inflation. By the end, participants will be able to construct robust financial models that support enterprise valuation.

Estimating Continuing Value

This module explores the principles and practical methods for estimating a company's continuing value within the valuation process. Learners will examine two-stage and multistage models, understand the impact of forecast length, and evaluate alternative approaches to continuing value estimation. The module also addresses common misconceptions and the importance of economic fundamentals in valuation.

Estimating the Cost of Capital

This module guides learners through the process of estimating a company's cost of capital, including both equity and debt components. You will explore methods for adjusting for company and industry risk, calculating after-tax cost of debt, and determining appropriate capital structure weights for WACC calculations. By the end, you'll be able to contextualize a firm's capital structure against industry peers.

Moving from Enterprise Value to Value per Share

This module guides learners through the process of transitioning from enterprise value to calculating value per share, including the treatment of nonoperating assets, debt, hybrid securities, and employee stock options. You will gain practical skills in adjusting for various financial claims and accurately estimating equity value and per-share valuation. The module emphasizes real-world considerations in corporate valuation and shareholder analysis.

Analyzing the Results

This module guides learners through validating and interpreting the results of a financial valuation model. You will explore techniques for checking model accuracy, assessing plausibility against market data, and using scenario analysis to understand the impact of different assumptions. By the end, you'll be equipped to critically evaluate and refine your valuation outcomes.

Using Multiples

This module explores the use of valuation multiples as a practical tool for assessing company value, including how to select appropriate peer groups, adjust for nonoperating items, and choose between different financial metrics such as EBITA and EBITDA. Learners will gain insights into the strengths and limitations of various multiples and how to apply them thoughtfully in real-world scenarios.

Valuation by Parts

This module explores how to value companies with multiple business units by constructing stand-alone financial statements, understanding the role of financial subsidiaries, and determining appropriate costs of capital for each segment. Learners will gain practical skills in segment-level financial analysis and valuation techniques used by industry professionals.

Taxes

This module guides learners through the process of reorganizing financial statements to accurately estimate operating and cash taxes for valuation purposes. You will explore how to interpret public tax disclosures, adjust for deferred taxes, and incorporate these elements into free cash flow calculations. By the end, you'll understand how taxes impact valuation models and financial analysis.

Nonoperating Items, Provisions, and Reserves

This module explores how to identify and interpret nonoperating items, provisions, and reserves within financial statements. Learners will discover techniques for uncovering hidden one-time charges and understand the implications of provisions on taxes and company valuation. By the end, you'll be able to analyze the impact of these items on free cash flow projections.

Leases

This module explores how companies account for and value operating leases, including their impact on financial statements and enterprise valuation. Learners will examine methods for adjusting financial data to reflect lease obligations and compare alternative approaches to lease capitalization. By the end, you'll understand how leases influence both enterprise and equity value calculations.

Retirement Obligations

This module explores the structure and implications of retirement benefit obligations, including how pension expenses are reported and analyzed in financial statements. Learners will also examine the impact of pensions on a company's cost of capital and understand the process of estimating and adjusting industry beta for valuation purposes.

Measuring Performance in Capital-Light Businesses

This module explores how to measure financial performance in businesses that require minimal capital investment, with a focus on return on invested capital (ROIC) and its limitations. Learners will examine the impact of capitalizing intangible investments like R&D and understand alternative metrics for evaluating value creation in capital-light industries.

Alternative Ways to Measure Return on Capital

This module explores alternative methods for measuring return on capital, focusing on the differences between traditional and cash flow-based approaches. Learners will examine the calculation and interpretation of CFROI versus ROIC, and consider practical implications for investment decision-making. By the end, you'll understand how these metrics impact value assessment and capital allocation.

Inflation

This module explores the challenges of analyzing and forecasting company financials in high-inflation environments. Learners will discover how inflation distorts financial statements and learn practical methods for adjusting projections and valuations to account for inflationary effects.

Cross-Border Valuation

This module explores the unique challenges and best practices for valuing businesses across borders, including how to estimate cost of capital in different currencies, address foreign-currency risk, and interpret translated financial statements. Learners will gain practical skills for applying valuation methods consistently in international contexts and understanding the impact of accounting standards like IFRS and US GAAP.