Beta & Relative Risk
We can add the risk-free rate and the equity risk premium to determine how much the market, or an average risk stock, will return. But what if our stock is more or less risky than the market? For that, we …
Alpha Models
The Equity Risk Premium
The Equity Risk Premium is the premium investors charge for investing in the average risk equity over and above a risk-free investment. The ERP is a dynamic number that varies over time due to changes in growth, inflation, and risk. What …
The Risk-Free Rate
The risk-free rate is a foundational element of investing. It’s the theoretical rate of return you can get investing in something that is guaranteed and has no risk. It’s a reference point in investing as it makes sense to understand …
How to Value a Company: A Complete Guide
The value of a business is equal to the amount of cash you can take out of it for the rest of its life, discounted to the present. Learning how to value a company is just like riding a bike. …
How to Read Financial Statements Mini-Course
Before you can value a company, you have to understand the numbers. This guide is an attempt to be the resource I wish I had when first starting to read financial statements. This mini-course is not designed to be a …
Micron: Consolidation and Cash Flows
There’s a lot that goes into valuing a company. I’ve valued fast-growing companies in my previous articles. Astute readers may have noticed I discounted the company’s cash flows, but I didn’t explain the method behind the madness. With Micron, I’m …
Floor & Decor: Decorative Disruption
Founded in 2000, Floor & Decor Holdings is a high-growth, differentiated, multi-channel specialty retailer of hard surface flooring and related accessories. According to their website, they offer the industry’s broadest in-stock assortment of tile, wood, laminate, and natural stone flooring along with …
Zendesk: Here Comes The Sun
Zendesk is a fast-growing software-as-a-service (SaaS) business that has made a name for itself with small businesses looking for customer support software. I think the market has high hopes for Zendesk yet has still underestimated its “long-tail” potential. It follows …
Twilio: Flexing its Muscles
Have you ever ordered an Uber, signed up for Netflix, booked a stay at an Airbnb, ordered a pizza on the Dominos mobile app, or received a text message after entering a password to verify it is you? If so, …