Equities - Part 7

Equities - Part 7


This eCourse consists of two modules. Module 1 focuses on the quantitative side of things. Ratio analysis, the subject of the first part of the tutorial, is one form of quantitative assessment. It provides a way of summarizing a large volume of financial accounting information into simple measurements. The second part of this module looks at stock valuation models, beginning with the oldest and simplest method of valuing stocks - the dividend discount model - which equates the fundamental value of a stock to the present value of the stock's expected future dividends. The dividend discount model is regarded by many analysts these days as conservative and outmoded, although much of the intuition from the model is also embedded in other valuation models. Two of these - the discounted cash flow model and residual income model - are also covered in this module.

Module 2 examines alternative ‘returns-based’ valuation techniques, which can be used to determine how efficiently a company is using its capital resources. In particular, the concept of EVA as a method of calculating shareholder value creation is explored in detail. The module demonstrates how EVA can be reconciled to the DCF valuation technique and compare the differences between accounting returns and cash returns used for discounting. Finally, it highlights what adjustments should be made to enterprise value in deriving a single stock price target.


On completion of this course, you will be able to:
- Separate a company's return on equity into a number of key financial metrics in order to identify where within the firm superior/inferior return is being earned
- Describe the different models used to estimate the fundamental value of a stock
- Outline the differences between return on equity (ROE) and return on invested capital (ROIC)
- Understand and apply Economic Value Added (EVA) as a technique for assessing shareholder value creation
- Identify the differences between cash returns versus accounting returns on invested capital
- Convert enterprise value into a single stock price target


Module 1: Equities - Research & Valuation
Topic 1: Primary Financial Ratios
Topic 2: Valuation Methods & Analysis

Module 2: Equities - Returns-Based Valuation
Topic 1: ROE and ROIC
Topic 2: Economic Value Added
Topic 3: Cash Returns and Accounting Returns
Topic 4: Enterprise Value and he Single Stock Price Target


SFC:2.5, PWMA:2.5
All Member: HK$700
Non-Member: HK$975
Staff of Corporate Member: HK$700