7 Best Valuation Books

It is important to attain complete knowledge of valuation and finance before entering the market. Although there are many sources to learn about valuation if you prefer reading a book rather than attending an online webinar then we have made a list of top valuation books.

#1 – The intelligent investor

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by Benjamin Graham

It is considered as the most important book ever written on the topic of investing and valuation. Written in 1949, the book has many inspiring quotes by Benjamin Graham that can really motivate you for a career in finance. In this book, Graham Benjamin enlightens us about the strategies that can be used to reach our goals and how the risks involved can be minimized. Concepts of value investing are explained so well that you can easily understand how to invest on the basis of assets and profits. Graham has tried to cover all the important aspects of technical trading in the book. According to his philosophy of investing, buy stocks and bonds at a discount to their intrinsic value. By including a margin-of-safety at the time of purchase, an investor does not have to rely on accurately forecasting what the future will bring. This book is considered as the bible of finance and has been rated 4.25 stars out of 5 by the Goodreads.com.

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#2 – Theory of Investment Value

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by John Burr Williams

Theory of investment was printed first in 1938. It revolves around the idea that stocks are worth the present value of their dividends paid in perpetuity. In this book, the investment value of a stock is defined as the net present value of its future dividends. The book is known to feature the technique of Discounted Cash Flow which is the foundation of business valuation for making investment decisions. The well known investor Warren Buffet was highly inspired by the Theory of Investment by John Burr Williams. Two major takeaways from this book are that the intrinsic value of a business can be taken out of discounted value over the course of its lifetime and a business that can reinvest its earnings at a higher rate than the applied discount rate should do so while a business which cannot reinvest should not do so. The classic book has the rating of 3.9 on the goodreads.com

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#3 – Valuation: Measuring and Managing the Value of Companies

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by McKinsey & Company Inc.

The book has been coauthored by Tim Koller, Marc Goedhart and David Wessels and is one of the best guides for corporate valuation. The book establishes some proven principles of value creation, completely denying the myths that prevail through the world. It provides the complete knowledge required by executives to make value creating decisions. The book contains important case studies regarding analyzing the historical performance of a company and rearranging the financial statements of the company to have a closer look at the economic performance. The topic of estimating the cost of capital has been explained thoroughly with the most useful practical tips. The book emphasizes on linking a company’s valuation multiples to the core drivers of the performance. This is the must have book for all the investment banking analysts and investors out there.

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#4 – Damodaran on Valuation: Security Analysis for Investment and Corporate Finance

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by Aswath Damodaran

Aswath Damodaran is a gifted teacher and a respected valuation authority. This book delves deeply into the three basic approaches to valuation i.e. discounted cash flow valuation, relative valuation and contingent claim valuation. The detailed explanation with ample of real world examples of many US based and other international firms makes it easy to understand the motive, advantages and disadvantages of each particular model and also motivates by developing the ability of readers to judge complex and precise valuation scenarios perfectly.

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#5 – Equity Asset Valuation

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by John Stowe

The book combines finance and accounting concepts into discussion providing the evenness of subject matter treatment, consistency of notation, and continuity of topic coverage. It covers the following topics:

• Equity valuation—applications and processes
• Return concepts essential for evaluating an investment
• Discounted dividend valuation
• Free cash flow valuation
• Market-based valuation—including price and enterprise value multiples
• Residual income valuation
• Private company valuation

It is an extremely important read for the students who want to strengthen the concepts of valuation before going out in the field of finance. There are many specific valuation examples used throughout the book making it very useful for Finance students learning how to implement intrinsic stock valuation.

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#6 – Business Analysis and Valuation: Using Financial Statements

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by Krishna G. Palepu

The important topics that are covered in this book are business strategy analysis, accounting analysis, financial analysis and prospective analysis. The book depicts the application of these business analysis in securities analysis, credit analysis, corporate financing policies analysis, mergers and acquisitions analysis, and governance and communication analysis. The main advantage of this book is that it features Harvard Business School cases which provide an in depth practical application of various subjects and the techniques that can be used to handle a similar situation.

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#7 – Determining Value: Valuation Models and Financial Statements

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by Richard Barker

This book describes all the methods used to value companies. Various valuation methods like price-earnings ratio, dividend yield and EVA have been discussed in an elaborate manner. A single that can contain the gist of the book is that the valuation model is chosen on the basis of available data and the quality of data and not on the basis of the theoretical validity of the model. The book identifies the relationship between various valuation models and brings to light the assumptions made by each model. The real life cases taken upon in the book instills the learning that stays for the lifetime.

Also, there are several other books available to learn the techniques of valuation but these books are perfectly suitable for novice as well as experienced. Even the teachers use these books for reference. We hope you go through these Valuation Books and make the best out of them.

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