Musings on Markets

JULY 17, 2023

Exacerbating the pain, corporate default spreads rose during the course of 2022: While default spreads rose across ratings classes, the rise was much more pronounced for the lowest ratings classes, part of a bigger story about risk capital that spilled across markets and asset classes.

Marketability 98

Marketability Risk Premium Start-ups Treasury 98

Musings on Markets

JANUARY 5, 2024

Beta & Risk 1. Equity Risk Premiums 2. Standard Deviation in Equity/Firm Value 2. Book Value Multiples 3. Employee Count & Compensation I nvesting Principle Financing Principle Dividend Principle Hurdle Rate Project Returns Financing Mix Financing Type Cash Return Dividends/Buyback s 1. Buybacks 2.

Dividends 105

Dividends Risk Premium Equity Book Value 105

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Equity 80

Equity Book Value Start-ups Corporate Finance 80

Musings on Markets

JANUARY 6, 2023

For example, I have seen it asserted that a stock that trades at less than book value is cheap or that a stock that trades at more than twenty times EBITDA is expensive. I do report on a few market-wide data items especially on risk premiums for both equity and debt. Price to Book 3. High-Low Price Risk Measure 5.

Risk Premium 52

Risk Premium Dividends Start-ups EBITDA 52

Musings on Markets

JANUARY 9, 2021

Consider, for instance, an investor who picks stocks based upon price to book ratios, who finds a stock trading at a price to book ratio of 1.5. buy stocks that trade at less than book value or trade at PEG ratios less than one) for individual stocks.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Musings on Markets

FEBRUARY 15, 2023

It is to remedy this defect that analysts scale profits to invested capital, with equity and capital variants: In the equity version, you divide net income by book equity to estimate a return on equity, a measure of what equity investors are generating on the capital they have invested in a company.

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

Musings on Markets

JULY 22, 2021

It affects my cash flows, but its effect on value is dwarfed by changes in assumptions about market size and share. The second is the cost of capital, a number that most valuation classes and books (including mine) belabor to the point of diminishing returns.

Marketability 99

Marketability Start-ups Equity Price to Book 99