Track 04Module 1 of 611 sources
Valuation and what the price already expects
Build a simple discounted cash flow, then turn it around to read the expectations in today's price.
Key ideas
- Value is the cash a business will produce, discounted for time and risk. Every multiple is a shortcut for that calculation.
- The useful question is not what a stock is worth but what growth and margins the current price already assumes, and whether that is likely.
- The discount rate links every stock to the bond market. When risk-free yields rise, long-duration growth stocks lose the most value.
- Earnings yield against the government bond yield is a rough gauge of how much equities pay for their risk.
Start hereWatch or read these first. They carry the core idea.
Session 1: Introduction to Valuation
Video · Aswath Damodaran · 16:15
The first session of the best-known valuation class. Sets out the common mistakes.
Data
Damodaran Online: data, spreadsheets and lecture notes
NYU Stern
Free data on costs of capital, margins and multiples by industry and country, India included. Bookmark it.
Book Talk with Michael Mauboussin - "Expectations Investing"
Video · Columbia Business School · 1:07:19
Reverse the valuation: start from price and ask what must be true.
CoreThe standard references. Work through them once the idea is clear.
Book
Expectations Investing
Michael J. Mauboussin, Alfred Rappaport
The book behind the expectations approach.
Report
Consilient Observer (Michael Mauboussin)
Morgan Stanley IM
Research notes on returns on capital, base rates and competitive advantage.
Book
Course
Varsity Module 15: Integrated Financial Modelling
Zerodha Varsity
Build a full three-statement model of an Indian company step by step.
Data
Shiller PE ratio history
Multpl
A century of the cyclically adjusted price to earnings ratio for the US.
Go deeperResearch, primary sources and data for when you want the detail.
Valuation Undergraduate Spring 2025
Playlist · Aswath Damodaran · 28 videos
A more recent run of the same class.
MIT 15.401 Finance Theory I, Fall 2008
Playlist · MIT OpenCourseWare · 20 lessons
MIT's finance theory course: present value, risk and the capital asset pricing model.
Practice
For one Nifty 50 company, work out the growth rate the current price implies if margins stay where they are. Decide whether you believe it.
See it live
Where this leads
04.2 · Investing and ValuationQuality, moats and the capital cycleTell a durable compounder from a temporarily profitable business, and use the capital cycle to time sectors.05.2 · Macro and LiquidityRates, the yield curve and what bonds are sayingRead the level and shape of the curve, split yields into real rate and inflation expectation, and track what the market expects from the Fed.