The Dark Side of Valuation

by Aswath Damodaran

Financial professionals have long faced the challenge of accurately valuing companies that are difficult to value using conventional methodologies. Years ago, this challenge was most keenly felt in the "dot-com" industries, and many professionals fell victim to the "dark side," creating values that were simply unsustainable. Now, amidst today's global financial crisis, the same challenge applies to a far wider spectrum of enterprises and assets, ranging from Asian equities to mortgage-backed securities, financial services firms like Lehman to real estate firms like Sears. In The Dark Side of Valuation, the world's top expert on valuation brings together today's best practices for accurately valuing young, distressed, and complex businesses. Aswath Damodaran has thoroughly revised this book, broadening its perspective to consider all companies that resist easy valuation. He covers the entire corporate lifecycle, from "idea" and "nascent growth" companies to those in decline and distress; and offers specific guidance for valuing infrastructure, real estate, technology, human capital, commodity, and cyclical firms. Damodaran places special emphasis on the financial sector, illuminating the implications of today's radically changed credit markets for valuation. Along the way, he addresses valuation questions that have suddenly gained urgency, ranging from "Are US treasuries risk-free?" to "How do you value assets in highly illiquid markets?"

Genres: Finance, Business, Nonfiction, Economics, Textbooks, Amazon, Accounting

590 pages, Paperback

First published February 6, 2001

About the author

Aswath Damodaran is a Professor of Finance at the Stern School of Business at New York University (Kerschner Family Chair in Finance Education). He is well known as the author of several widely used academic and practitioner texts on Valuation, Corporate Finance and Investment Management; as well as a provider of comprehensive data for valuation purposes.

Reviews

[JuanK Russo · Rating 4 out of 5]

A current read of this book might feel dated, but at the time it hinted the development and course of all tech companies and their IPO's, but remember: social media wasn't a thing then, so check your expectations when picking up this one.

[Ethan Lambert · Rating 4 out of 5]

Advanced Follow up of Investment Valuation.

[HD · Rating 5 out of 5]

Pitfalls and Challenges in Valuations.

The book is like the Jedi training for finance folks—seriously, it's that good. He spills the beans on all the sneaky pitfalls in valuing stuff, making you feel like you've got this secret handbook for the financial rollercoaster.

Imagine, he talks about how we go all-in with models and how assumptions can be the wild cards that mess everything up. Market dynamics? Yep, he goes there, telling tales about how the market mood swings can throw your valuations off the track.

Now, heads up, this book isn't your quick weekend read. It's a bit like a feast; you'll need some time to devour it. But trust me, every page is worth it. Damodaran takes you on a journey through models, assumptions, value vs price, and even dives into our quirky human biases.

And the best part? He dives into our human side, exposing how our biases play tricks on us when putting a price tag on things. It's not just a cautionary tale, though; Damodaran hands you a toolkit to navigate these tricky waters.

Conclusion: Whether you're a finance guru or just dipping your toes, this book's got the vibe. Real-world examples, a dash of humor, and Damodaran's wizardry—it's the finance book you'll actually enjoy reading.