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Valuation

Multiples, discounting and value scenarios without false precision.

Path goal: Check cash-flow, risk and growth assumptions before discussing price.

Reading sequence

This editorial sequence preserves the Russian curriculum order and uses the existing translated guides.

Foundation

Core explanations: start here if the topic is new.

Market capitalization and multiples: compare the right quantities
How to distinguish equity value from business value, choose a ratio denominator and test the limits of the comparison.
Peer comparison: comparability first, median second
How to build a fair comparison group and detect differences in dates, earnings, debt and business structure.
Discounted cash flows: a model with explicit assumptions
An educational calculation of present value, terminal value and sensitivity without forecasting a real company.
Growth and value: two languages of expectations, not two lists of winners
How to connect development rate with price, investment quality and profit durability without choosing an investment style for the reader.

Further connections

Additional concepts and practical connections after the foundation.

Annuity and contribution timing: future value, present value and payment dates
How to value equal payments, compare beginning and end-of-period contributions and understand the limits of a perpetuity model.
Impairment: why depreciation is not enough to test an asset’s value
Separate planned allocation of cost from recoverability testing and read cash-generating-unit tests without false precision.
Business model: what the customer pays for and where cash flow arises
Why “the company operates in a growing market” does not by itself explain the business model.
Buyback: why higher earnings per share is not automatically value creation
A buyback uses company cash; the smaller denominator cannot be analysed apart from changed resources.
Capital allocation: compare projects, debt and distributions on one basis
Management uses money through more than dividends; compare alternatives with consistent dates, cash flows and risk.
Competitive cycle: why record profit can mean an expensive business
When high profit attracts new capacity, today’s success can create tomorrow’s price pressure.
Amortized Cost of Debt: Why Interest Expense Is Different from
Trace the movement of the balance sheet liability between receipts
Discount rate consistency: align currency, inflation, risk and time
A discount rate is not a decorative cell selected to produce a desired answer.
Gordon model: which dividends and growth belong in the formula
Derive D1/(ke−g), test payout sustainability and identify the limits of dividend valuation.
EV/EBITDA, leases and replacement equipment: where necessary costs disappear
EV/EBITDA simplifies comparison but does not remove the business’s need for premises, equipment and working resources.
Economic advantage: how to support its strength and duration
The word “brand” does not prove an economic advantage.
From EV to shareholders: debt, available cash and non-controlling interests
Valuing the operating business is not the same as valuing the parent company’s shares.
FCFF versus FCFE: identify the cash-flow recipient before choosing the discount rate
Distinguish free cash flow to the firm from free cash flow to equity and keep the recipient, financing and discount rate aligned.
Financial statement adjustments: correction, estimate or analytical measure
How to distinguish accounting changes from additional measures and test the rationale for each adjustment.
Fixed assets: capital expenditure, maintenance and movements in carrying amount
How to connect the purchase and use of fixed assets with expenses, cash investment and carrying amount.
Fund net asset value and exchange price: why they are different numbers
Assets minus liabilities, value per unit, creation of new units and a secondary-market premium without a list of available funds.
Competition and cooperation: how others’ decisions change the result
How to build a payoff matrix, distinguish one-off competition from repeated interaction and avoid turning a model equilibrium into a company forecast.
Index and active approaches: compare implementation cost and purpose, not labels
An index approach seeks to reproduce a chosen benchmark; an active approach departs from it for its own purpose.
Insurance float: funding with future obligations
How premiums received before future claims create insurance funding, why float is not profit and how to consider its cost and liquidity.
Inventory and depreciation: when a purchase becomes an expense
How goods held for sale differ from equipment in use, and how both affect results and cash.
Inventory: costing and write-down answer different questions
Do not confuse allocating purchase cost with checking whether the remaining cost can be recovered through sale.
Investor relations: read disclosure, not the presentation story
Move from an investor presentation to primary disclosure, reconcile KPIs and separate management intentions from achieved results.
Management and incentives: what the system rewards
Compare compensation metrics, share ownership and resource allocation without the myth of one ideal manager.
Margin of safety: a discount does not insure against model error
Why the gap between estimated value and price is conditional on the model, not a universal safe-buying percentage.
Negative P/E: why loss-making companies cannot be ranked on the usual scale
Negative P/E is the quotient of a positive price and negative earnings per share; the familiar “lower is cheaper” rule loses meaning.
Option premium: intrinsic value and the price of remaining uncertainty
Why being right about the underlying direction does not guarantee an option profit, and why time value is not a fixed percentage.
Policy, estimate and error: preserve comparability after figures change
How to classify a revision and avoid attributing business growth to a change in the accounting basis.
P/B: why book cheapness means different things for a bank and a manufacturer
How the price-to-book ratio links market equity value with accounting equity, and why sector, asset quality and future returns matter.
Repo: two legs, collateral haircut and the need to provide additional resources
Why transferred securities and financing are linked, but a change in collateral value can create an additional cash need.
P/S and EV/Sales: revenue is shared, residual rights differ
Why equal sales do not make companies equally cheap: debt, margin and capital needs.
Value per customer or megawatt: checking an industry denominator
How to use valuation units without treating registration as a customer or capacity as cash flow.
Allocating capital and teams across segments
Indivisible projects, a limited budget, management capacity and comparison of incremental value rather than revenue.
New share issuance: when ownership falls but value does not necessarily
Ownership dilution, new cash received and the change in value per share must be calculated separately.
Trailing, forward and normalized EPS: three different P/E bases
Why two services can show different P/E ratios at the same price because they divide by different earnings measures.
Unit economics: a profitable order does not yet mean a profitable customer
Unit economics examines revenue and costs for a chosen business unit.
Reverse valuation: what growth and margin are already priced in
How to invert a valuation model and distinguish a price’s conditional requirements from a single market forecast.
Valuation range: how to communicate uncertainty without inventing a confidence interval
Price is an observable exchange condition at a particular time and size; value is a model conclusion under stated assumptions.

Advanced topics

Specialised models and limitations: check assumptions against the foundation.

Duration and convexity: how accurate is a bond’s linear estimate
Measure sensitivity to a small yield shift, calculate a second-order adjustment and understand the limits of one-rate analysis.
ROIC versus WACC: growth creates value only with sufficient return
Compare operating return with the required return on capital, while separating mature assets from incremental investment.
DCF sensitivity and scenarios: do not confuse a table slope with outcome probability
A sensitivity table answers how a result changes when a parameter changes.
Terminal value: perpetual growth and exit multiple answer different questions
Why the end of a detailed forecast is not the end of a business, and how to keep continuation assumptions visible.

Key terms

Future value

The amount on a selected future date when cash flows and accumulation factors are explicitly specified.

Compound annual growth rate (CAGR)

A constant calculated annual rate linking an indicator’s starting and ending values.

Discounted cash flow valuation (DCF)

A valuation model based on expected future cash flows brought back to the present.

Collateral haircut

The difference between the valuation of posted collateral and the amount of funding supported by it, expressed on a specified basis.

Discounting

Bringing future cash amounts to a common point in time using a selected rate.

Sustainable competitive advantage

A mechanism that allows a business to maintain an attractive return despite competition.

Exponential moving average

A recursively smoothed series in which the influence of past observations gradually declines.

Equity risk premium

A model-based or observed return increment relative to a selected base rate; the method must be specified.

EV/EBITDA: enterprise value relative to EBITDA

The ratio of analytical enterprise value to EBITDA for a comparable period.

Free cash flow to equity (FCFE)

Analytical cash flow available to equity holders after reinvestment and corresponding debt-financing transactions.

Free cash flow to the firm (FCFF)

Operating-business cash flow after necessary reinvestment and before distribution between debt and equity capital.

Profitability index (PI)

In a simple model with one initial investment, the present value of future net receipts per unit of investment.

Inventory costing by the cost of each purchased unit

Definition of inventory costing by the cost of each purchased unit, with an editorial example and limits of application.

Internal rate of return (IRR)

The discount rate at which the net present value of specified cash flows equals zero.

Forecast calibration

The correspondence between stated probabilities and observed event frequencies in a comparable series of forecasts.

Maintenance capital expenditure

An analytical estimate of investment needed to preserve a business’s existing ability to operate.

Expected value

The average result in a probabilistic model, calculated by weighting outcomes by their probabilities.

BCG matrix

A framework using four quadrants of growth and relative market share, with limits on its application.

Inventory valuation methods

Methods for allocating inventory cost between period expenses and goods remaining in inventory.

Net debt

Financial debt less the cash resources included under the selected methodology.

Non-controlling interest

The share of outside owners in a subsidiary consolidated by the controlling company.

Net operating profit after tax (NOPAT)

An analytical operating profit after a notional tax, excluding the effect of the chosen financing structure.

Normalized earnings per share (normalized EPS)

An analytical EPS estimate on a recurring or otherwise explicitly defined basis, rather than a separate published fact.

Net present value (NPV)

The sum of a project’s discounted cash flows, including initial and subsequent investments.

Brier score

The mean squared difference between the stated probability of a binary event and its actual outcome.

P/B — price to book value

The ratio of market capitalization to the corresponding carrying value of equity.

P/E — price to earnings

The ratio of a share price to earnings per share, or of market capitalization to the corresponding earnings.

Total cost of a deposit (Russian-specific historical term)

A historical Russian indicator in the cited 2014–2024 materials; the source does not establish a current 2026 methodology.

Nash equilibrium

A set of actions in which no participant benefits from changing their own action alone, given the actions of the others.

Mean reversion

The tendency for a repeat measurement of observations selected for being extreme to be less extreme when a random component is present.

Return on investment — ROI

The result of an investment relative to its cost; the result and calculation period must be stated explicitly.

Return on invested capital (ROIC)

Operating profit after a notional tax charge relative to the average capital engaged in operating activity.

Market capitalization

The market value of issued shares, calculated using the price and the corresponding number of shares.

Weighted-average cost method for inventory

An inventory-costing method that allocates the cost of interchangeable items using a weighted-average price in an agreed manner.

Project payback period

The period over which cumulative cash inflows compensate for the initial costs in a selected model.

Power-law distribution

A distribution whose tail over a stated range declines as a power of the threshold.

Enterprise value (EV)

An analytical valuation of a business for different capital providers, not only shareholders.

Net asset value (NAV)

The value of assets less liabilities; a per-unit figure requires division by the corresponding number of units.

Insurance float

Funds held by an insurer until related insurance obligations are performed and potentially available to finance investments.

Terminal value

An estimate of the value of a business continuing or ending at the end of the detailed forecast period.

Unit economics

Results for a selected business unit with an explicitly defined composition of revenue and costs.

Weighted average cost of capital (WACC)

An estimated required return for financing sources, taking into account their weights and the assumptions selected.

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