Equity Formulas
Gordon Growth Model Equity risk premium estimate
(1 year forecasted dividend yield on market index)+(consensus long-term earnings growth rate)-(long term government bond yield)
Blume adjusted beta
(2/3 * regression beta)+(1/3*1)
trailing D/P
(4 x most recent quarterly dividend/(market price per share)
FCFF from EBIT
(EBIT x (1-tr))+Dep-FCinv-WCInv
FCFF from EBITDA
(EBITDA x (1-tr))+(Dep x tax)- FCInv-WCInv
Leading D/P
(forecasted dividends over the next four quarters)/Market price per share
earnings retention rate
=1-dividend payout ratio
Holding Period Return
CF@1 is often D@1
FCFF from CFO
CFO + (Int x (1-tr))-FCInv
FCFE from CFO
CFO - FCINv + Net borrowing
FCinv
Capex - proceeds from sales of long-term assets
BV of equity
Common shareholder's equity = TA-TL-Pref stock
ibbotson-chen
EINFL -est inflation EGRPS- Exp g in real earnings per share EGPE - exp g P/e EINC - Expected income componenet (dividend yield or income)
Leading P/E
Market price per share/ Forecasted EPS over next 12 months
trailing P/E
Market price per share/EPS over prev 12 months
FCFE from NI
NI + NCC - FCInv - WCInv + Net borrowing
Forecasting FCFE
NI - [(1 - DR) x (FCinv - Dep)] - [(1 - DR) x WCinv] DR = Target debt to asset ratio
CF formula from NI
NI+NCC (dep, amort)
FCFF from NI
NI+NCC+(Int*(1-tax))+Dep-FCInv-WCInv
ROIC
NOPLAT/Invested capital
NOPLAT stands for
Net operating profit less adjusted taxes. (earnings before interest, available to provide a return to equity and debt holders)
method of average ROE for normalized earnings
Normalized EPS = avg ROE x Current BVPS
ROCE
Operating profit/capital employed
PEG ratio
PE TO G
Levered and unlevered beta
UL=(1/1+D/E)*B of benchmark Lev=(1+D/E)*Bul Only difference is dividing by 1. You UL, then multiply by UL to get to target beta
Perceived mispricing with intrinsic value
Ve-P=(V-P) + (Ve-V). Est value - price = (intrinsic value - price)+(estimated value- price). Sum of misspricing and the error of intrinsic value estimate
pastor stambaugh
adds liquidity to fama french
terminal ddm for two stage cash flows
calculate the terminal value using the DDM, then use the calculator to discount it all in CF
justified trailing p/e. 3 formulas
can also be derived from leading P/E = Leading P/E x 1+g
p/e multiple leading
leading p/e x forecasted earnings in year n+1
Price to cash flow
market price of equity (per share)/Cash flow (per share). Cash flow can be CF, adjusted CFO, FCFF, or EBITDA
In ROIC, invested capital is defined as
operating assets - operating liab
PVGO
present value of growth opportunities
fama french
splits up betas and premium by factors, extended capm
h model in terms of r
study this, it's just a rewritten form of the normal h model, you might not need to memorize
Sustainable Growth Rate with ROE (the big long PRAT, and the short one)
this is a blown out b x ROE (b=retention rate) Profit margin, Retention ratio, Asset turnover, financial leverage
p/e multiple terminal value trailing
traling P/e x earnings in year n
FCInv if no long term assets sold
Ending net PP&A - Beginning net PP&E + Depreciation
cannibalization formula for products
Expected number x % representation X % cannibilization
Firm value with free cash flow - Equity value
FCFE discounted at required return on equity
Firm value with cash flow models - Firm Value
FCFF discounted at WACC
FCFE FROM FCFF
FCFF-int(1-TR)+Net borrowing The difference is removing interest net of tax, adding in net borrowing
Portion of firms leading PE related to PVGO
Find P/E, then find P(VGO)/E, divide P/E by PVGO/E