Dark Side of Valuation, The: Valuing Young, Distressed, and Complex Businesses

by Aswath Damodaran

The Definitive Guide to Valuing Hard-to-Value Companies: Fully Revised for Today's Financial Markets

Valuing money-making companies that have long histories and established business models is straightforward. It is when you encounter difficult-to-value companies that you feel the urge to go over to the dark side of valuation--where you abandon first principles and create new metrics. Aswath Damodaran looks at a range of these companies, from start-ups in new businesses to distressed companies, from banks facing regulatory turmoil to commodity firms, and from emerging market upstarts to multinationals that spread across geographies and businesses. With each grouping, he helps you examine the call of the dark side and its practices and frameworks to value these firms.

To answer these questions, Aswath looks at companies across the life cycle and in different markets, from Uber and Shake Shack at one end of the spectrum to Vale, Royal Dutch, and United Technologies at the other end.

In the process, you learn how to

Deal with "abnormally low" and negative risk-free rates in valuation Adapt to dynamic and changing risk premiums Value young companies that are disrupting existing businesses Analyze commodity and cyclical companies across cycles Value a company as the sum of its parts or as an aggregation of its users/subscribers and customers Determine the difference between pricing and valuation, and why some investments can only be priced

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

800 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.