The Little Book of Valuation: How to Value a Company, Pick a Stock, and Profit Paperback – January 1, 2012
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- Publisher : Winsome Book India; 1st edition (January 1, 2012)
- Language : English
- ISBN-10 : 8126536489
- ISBN-13 : 978-8126536481
- Item Weight : 10.5 ounces
- Dimensions : 7.87 x 5.51 x 1.57 inches
- Customer Reviews:
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Top reviews from the United States
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That’s why I was so disappointed in “The Little Book of Valuation”. The core of “The Little Book” series is simplicity. All the other titles I’ve read are brief, “big idea” books. They aren’t designed to be exhaustive, and if the reader wants more on the subject, they can seek a more advanced text.
“The Little Book of Valuation” got way too far into the weeds. As an investor who is just beginning to value companies, I was looking for a starter kit, not a science project.
In “One Up on Wall Street” Peter Lynch writes about the “two minute drill”. It was his quick and dirty test of what to look for in a company. Revenue growth rate vs. P/E ratio, debt ratio and cash position per share where all calculated in under two minutes. Starting with a simple core valuation like this, even if crude, is helpful to newbies.
Not seeing a basic model like this was a let down. I felt like every piece of information that was presented had an exception or five to it. This made it difficult for me to grasp the material.
Oh, and also the pages fall out.
By Merry on September 19, 2020
Oh, and also the pages fall out.
For knowledgeable readers the book is less useful. To much time is spent presenting an answer on the mechanics of valuing a company and not enough time is spent on the nuances, tradeoffs, and implications of various valuation assumptions. The mechanics are important, but the book does not really grapple adequately with some of the big difficulties in valuation, which include the selection of discount rates and estimation of terminal value. For example, there is no discussion on merits or otherwise of using the average weighted cost of capital (AWCC) for discounting or presenting any alternatives. I don't claim that the approach is wrong just that it carries certain implications that deserve discussion.
Risk is dealt with simplistically through the discount rate, which is not inherently bad, but alternative actuarial approaches exist that I personally think deserve discussion, if only to inform the reader of the scope of the subject matter. Finally, success is as much about managing risk as it is about placing a value on a business. I feel that this most important point is lost.
Is the book worth reading? Absolutely. However, if you are hoping for a tool kit that will provide you with crystal ball to gaze on the future then you are surely going to be disappointed, because none exists.
Top reviews from other countries
So in summary, if you have some background in corporate finance this books is great. If you are looking to take your first steps into the area of valuation, there are other books that may not be as "little" but will be worth it. Make this your pocket reference guide.
Nevertheless, this book is worth reading for everybody who is interested in company valuations as I am due to my job.