Price and value are not the same thing.
Build the mental models every valuation framework rests on — before any math. Every concept from Damodaran Ch1–4 and McKinsey Ch1 and Ch4: intrinsic value, relative value, time value of money, risk and return.
The Little Book of Valuation by Aswath Damodaran + Valuation: Measuring and Managing (McKinsey)
Markets price assets every second. Intrinsic value changes far more slowly. Why the gap between the two is where every investing edge originates.
Intrinsic valuation asks what a business is worth on its own terms. Relative valuation asks what similar businesses trade for. Damodaran on when each is appropriate.
Damodaran's five principles: valuation is uncertain, simple often beats complex, the story drives the numbers, and your biases will corrupt your models if you let them.
A dollar today is worth more than a dollar tomorrow. Present value, future value, annuity formulas, and the perpetuity — the mathematical foundations of every DCF.
What investors demand for bearing risk. CAPM, beta as a measure of market sensitivity, and the equity risk premium — the single most debated input in all of finance.
Damodaran's financial balance sheet: assets-in-place vs. growth assets, debt vs. equity claims. Why accountants and valuators organize the same data differently.
The three variables that determine every business's intrinsic value. How changes in cash flow growth rates and discount rates interact to create massive valuation swings.
McKinsey's empirical case: companies that optimize for long-term value — not short-term EPS or stakeholder optics — produce better outcomes for all parties over time.
The long-run evidence from McKinsey: ROIC and growth explain the overwhelming majority of equity returns. Why short-term price action is noise but fundamentals are signal.
The most cited — and most misused — valuation multiple. What fundamentally drives P/E, why comparing raw P/Es across sectors is wrong, and Damodaran's case for median over mean.
Market cap prices the equity claim. Enterprise value prices the whole business. Why you can't use equity-based multiples with enterprise-value-based metrics.
Five multiples, five different perspectives on value. Which multiple applies to which business type, and the companion variables that explain why two companies trade at different multiples.
Buy at enough of a discount that even if your assumptions are slightly wrong, you still win. Graham's origin, Buffett's application, and how to build uncertainty ranges into a valuation.
Fourteen questions covering intrinsic vs. relative value, time value of money, risk and return, enterprise value, valuation multiples, and the margin of safety.