The Dark Side of Valuation: Valuing Old Tech, New Tech, and New Economy Companies

Book Description:

If the tech-stock swoon merely whets your appetite for this roller coaster of a market sector, and your eyes don’t glaze over at the very sight of formulas like "Return on Capital = EBIT (1 - t) / Capital Invested," then The Dark Side of Valuation is the investment guide you’ve been waiting for. Whether considering New Economy firms at their peak or their valley, writes Aswath Damodaran, the problem has always been determining their true value with equitable dispassion. A leading expert on the topic, Damodaran begins by noting that standard corporate valuations are determined by four factors: cash flow from existing investments, growth expected from this cash flow, length of time this growth is sustained, and cost of capital to sustain it. In what he admits is not always an easy read, Damodaran then details various ways to adapt conventional valuation methods for companies that lack key traditional variables (such as profits, track records, and even competitors with which they can be compared) in order to arrive at realistic valuations. Those not scared off by charts comparing the historical risk for T-bills and T-bonds since 1928 will find this book worth a look. --Howard Rothman

(Pearson Education) A comprehensive guide to valuing technology companies, for investors, financial executives, venture capitalist, and other professionals. Includes 5 detailed case studies that cover the entire tech lifecycle, from Amazon.com to Cisco and Motorola. DLC: Valuation.