Narrative and Numbers

Narrative and Numbers: The Value of Stories in Business

by Aswath Damodaran

Aswath Damodaran is a professor of finance who has written several books on business valuation, including The Little Book of Valuation: How to Value a Company, Pick a Stock, and Profit.

In this book, he computes valuation based on the business narrative. “One of the most important lessons I have learned is that a valuation that is not backed up by a story is both soulless and untrustworthy and that we remember stories better than spreadsheets.” Conversely, “when a storyteller has wandered into fantasyland, the easiest way to bring him or her back to Earth is with data that suggests the journey is either impossible or improbable.” Thus, “you need to bring both stories and numbers into play in investing and business, and valuation is the bridge between the two.” Continue reading

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The Little Book of Valuation

the-little-book-of-valuation

The Little Book of Valuation: How to Value a Company, Pick a Stock, and Profit

by Aswath Damodaran

How do you determine if a stock is overpriced or a bargain? NYU finance professor Aswath Damodaran explains.

“There are dozens of valuation models but only two valuation approaches: intrinsic and relative… The intrinsic value of an asset is determined by the cash flows you expect that asset to generate over its life and how uncertain you feel about these cash flows. Assets with high and stable cash flows should be worth more than assets with low and volatile cash flows… In relative valuation, assets are valued by looking at how the market prices similar assets.”

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