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The Dividend Discount Model (DDM): The Black Sheep of Valuation?

Brian DeChesare

When I started offering financial modeling training , I never expected to get questions about a methodology like the Dividend Discount Model (DDM). Otherwise, the written version follows: Why Use a Dividend Discount Model? The main argument in favor of the DDM is that it best represents what happens in real life when you buy a stock.

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Key Methods for Accurate Valuation of Shares

RNC

By analysing factors such as the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, and the enterprise value-to-EBITDA (EV/EBITDA) ratio, companies can determine whether their shares are undervalued or overvalued relative to its peers. A higher yield suggests an attractive income investment.

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A Follow up on Inflation: The Disparate Effects on Company Values!

Musings on Markets

In a final assessment, I break down companies based upon operating cash flows (EBITDA as a percent of enterprise value) and dividend yield (dividends as a percent of market capitalization).

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What is ‘Business Valuation’ in Shark Tank?

RNC

By analyzing factors like the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio, companies can determine if their shares are undervalued or overvalued compared to peers. Dividend Discount Model DDM estimates the present value of expected future dividends from owning a stock.

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KRONOS WORLDWIDE, INC. ANNOUNCES ACQUISITION OF JOINT VENTURE INTEREST, AMENDMENT TO REVOLVING CREDIT FACILITY AND QUARTERLY DIVIDEND

Benzinga

Kronos acquired the 50% joint venture interest that it did not already own for an upfront cash payment of $185 million (subject to working capital adjustments) and a potential earn-out payment of up to $15 million based on Kronos' aggregate consolidated net income before interest expense, income taxes and depreciation and amortization expense, (..)

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Valuation Using Multiples—What Is It and How Does It Work? Core Ideas Explained

Valutico

The ratio used might be EV/EBITDA, EV/Sales, P/E or another, depending on the valuation performed and the type of business being valued. So another major assumption when adopting this method, is that the type of ratio chosen as the comparison point, such as P/E or EV/EBITDA should be similar across similar firms. .

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Your Guide to Valuing a Company Using the Multiples Approach

Valutico

The ratio used might be EV/EBITDA, EV/Sales, P/E or another, depending on the valuation performed and the type of business being valued. So another major assumption when adopting this method, is that the type of ratio chosen as the comparison point, such as P/E or EV/EBITDA should be similar across similar firms. .