1. Price multiple valuation methods *a. distinguish between the method of comparables and the method based on forecasted fundamentals as approaches to using price multiples in valuation, and explain economic rationales for each approach;*
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b. calculate and interpret a justified price multiple;*
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c. describe rationales for and possible drawbacks to using alternative price multiples and dividend yield in valuation;*
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2. Price to earnings: determining earnings *d. calculate and interpret alternative price multiples and dividend yield;*
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e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
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f. explain and justify the use of earnings yield (E/P);*
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g. describe fundamental factors that influence alternative price multiples and dividend yield;*
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h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
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i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
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j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
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k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
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l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
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m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
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n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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3. Price to earnings: valuation based on forecasted fundamentals *d. calculate and interpret alternative price multiples and dividend yield;*
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e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
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f. explain and justify the use of earnings yield (E/P);*
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g. describe fundamental factors that influence alternative price multiples and dividend yield;*
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h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
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i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
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j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
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k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
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l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
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m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
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n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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4. Price to earnings: valuation using comparables *d. calculate and interpret alternative price multiples and dividend yield;*
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e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
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f. explain and justify the use of earnings yield (E/P);*
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g. describe fundamental factors that influence alternative price multiples and dividend yield;*
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h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
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i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
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j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
*
k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
*
l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
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m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
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n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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5. Price to book value *d. calculate and interpret alternative price multiples and dividend yield;*
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e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
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f. explain and justify the use of earnings yield (E/P);*
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g. describe fundamental factors that influence alternative price multiples and dividend yield;*
*
h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
*
i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
*
j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
*
k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
*
l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
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m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
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n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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6. Price to sales *d. calculate and interpret alternative price multiples and dividend yield;*
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e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
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f. explain and justify the use of earnings yield (E/P);*
*
g. describe fundamental factors that influence alternative price multiples and dividend yield;*
*
h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
*
i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
*
j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
*
k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
*
l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
*
m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
*
n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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7. Price to cash flow *d. calculate and interpret alternative price multiples and dividend yield;*
*
e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
*
f. explain and justify the use of earnings yield (E/P);*
*
g. describe fundamental factors that influence alternative price multiples and dividend yield;*
*
h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
*
i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
*
j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
*
k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
*
l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
*
m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
*
n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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8. Dividend yield *d. calculate and interpret alternative price multiples and dividend yield;*
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e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
*
f. explain and justify the use of earnings yield (E/P);*
*
g. describe fundamental factors that influence alternative price multiples and dividend yield;*
*
h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
*
i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
*
j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
*
k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
*
l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
*
m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
*
n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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9. Enterprise value / EBITDA ratio *d. calculate and interpret alternative price multiples and dividend yield;*
*
e. calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS;*
*
f. explain and justify the use of earnings yield (E/P);*
*
g. describe fundamental factors that influence alternative price multiples and dividend yield;*
*
h. calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals;*
*
i. calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology;*
*
j. evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables;*
*
k. calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation;*
*
l. calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model;*
*
m. explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition;*
*
n. calculate and interpret EV multiples and evaluate the use of EV/EBITDA;*
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10. Cross-border valuation *o. explain sources of differences in cross-border valuation comparisons;*
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11. Momentum indicators *p. describe momentum indicators and their use in valuation;*
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12. Valuation indicators: issues in practice *q. explain the use of the arithmetic mean, the harmonic mean, the weighted harmonic mean, and the median to describe the central tendency of a group of multiples;*
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r. evaluate whether a stock is overvalued, fairly valued, or undervalued based on comparisons of multiples.*
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