Valuation Fundamentals Explained 🏆 | Alastair Matchett posted on the topic | LinkedIn (2024)

Exciting: 2025 Investment Bank Internship Applications Are Now Officially Open 🏆 Here are some of the latest internship postings from some top firms:Goldman Sachs - Summer Analyst (EMEA): https://lnkd.in/gdu5y8B9J.P. Morgan - 2025 Corporate & Investment Bank Summer Analyst (US): https://lnkd.in/gUJ35DVgMorgan Stanley - Investment Banking Summer Analyst (US): https://lnkd.in/gCaUcBqq - Global Advisory Summer Analyst (US): https://lnkd.in/gKey_yG9Lazard - Financial Advisory Summer Analyst Program (US): https://lnkd.in/g3TWWrf2Nomura - Global Markets Summer Analyst Programme (US): https://lnkd.in/gsU2YYMHDeloitte - Investment Banking Summer Analyst (US): https://lnkd.in/gn6QARmQBarclays - Investment Banking Analyst Internship Program (US): https://lnkd.in/gnF-cjZBAn amazing opportunity to gain experience at some of the top firms.Access all application links for various regions conveniently in one place by downloading the complimentary Excel file below👇

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The Investment Banking Analyst Role Explained (What To Expect) 🏆 For those looking to break into the world of finance, working as an Investment Banking Analyst offers a rigorous yet unparalleled opportunity to build an extremely successful career.It requires a unique combination of technical skills, industry knowledge, and the ability to adapt quickly to the ever-changing financial landscape.Here's what to expect:Beginning the Journey: The Analyst ProgramThe journey into investment banking traditionally starts with a two to three-year analyst program that kicks off in late summer. Graduates are often selected for their potential and assigned to specific teams where they can leverage their skills and background to meet the bank's requirements.Roles and AssignmentsDuring their tenure, analysts are aligned with either product groups like M&A, leveraged finance, or industry groups such as healthcare or technology. They often stay within their initial group, deeply engaging with various roles and tasks that bolster their expertise in a particular domain.Core ResponsibilitiesAnalysts provide critical support across several domains including equity and debt offerings, valuations, and strategic advisory work. Key responsibilities encompass:- Building financial models and conducting due diligence- Creating compelling presentations for clients and stakeholders- Conducting extensive research and analysis to inform financial strategies- Gathering and synthesizing data for easy consumption by their teamsResearch and Financial ModelingAnalysts engage in both company and industry-specific research. They delve into financial reports, market trends, and regulatory considerations to provide insights that support client presentations and investment decisions.Analysts must not only be adept at presenting their findings but also ensure that their presentations are error-free and persuasive. This analysis forms the basis for client discussions and strategic decisions.Key Skills To 'Excel'- Advanced research and quantitative skills for thorough financial analysis- Comprehensive knowledge of industry regulations and financial compliance- Numerical prowess for accurate financial modeling and projections- Stellar communication abilities for both formal and informal presentationsFuture OpportunitiesThe trajectory of an Analyst is typically an upward one through the IB hierarchy. The skills honed here are not only pertinent to a career within investment banks. But are also transferable to other financial institutions like Private Equity firms or industry-specialized companies.How To Break InFor those seeking to break into banking, we offer rigorous training in accounting, financial modeling, valuation and much, much more.Mirroring the same training we provide to new hires at top investment banks!Check out our Wall Street recognized courses below on Financial Edge Training👇

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How is Venture Capital different from Private Equity?Find out with our latest Micro Degree

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NVIDIA nears a $2tn market cap...To put that in context: Feb 2023 Nvidia had a $700bn market cap.Feb 2022 Nvidia had a $530bn market cap.Feb 2021 Nvidia had a $400bn market cap.Feb 2020 Nvidia had a $152bn market cap.

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Barclays is buying back £10bn of stock between 2024 and 2026. How does that impact value? (share buy-back explainer) 🏆 Contrary to popular opinion the simple act of buying back shares should not increase a company's stock price.The value of a company's equity is equal to its business value (the enterprise value) plus cash, minus debt. What happens in a buyback? Assume the company's enterprise value = 100, its cash is 40, and its debt is 50. The equity value will be 100+40-50=90.If the company buys back 10 of its stock in the open market. Then cash will fall by 10 and so will the equity value: 100+40-10-50=80.However, the number of shares outstanding will also fall so although the equity value has fallen the share price will stay the same. So why do companies buy back stock, and how does it work in practice?When a company announces a buy back it's saying either:1. We have too much capital and can't find good investment opportunities for it.2. We think our stock is cheap and we are using our spare cash to purchase shares at what we perceive is a discount.In the first case, the return on capital should rise as capital efficiency increases, in the second case it's a signal that the company thinks the stock is underpriced. When Warren Buffett buys back stock always buy Berkshire Hathaway shares!Companies won't usually purchase the stock themselves. Instead, they engage an investment bank. They tell the bank we want to buy back say $10bn of stock over the next two years. The bank's traders will then opportunistically purchase the stock steadily to ensure the stock price does not fluctuate too much. #stockbuybacks #investmentbanking

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Investment Banking: Valuation Methodologies Explained 🏆 Valuation is the cornerstone of corporate finance. Allowing finance professionals to determine the fair market value of a company to inform its sale price or to support strategic decisions such as mergers or acquisitions.Valuation is not only pivotal for M&A activities, IPOs, and equity research. But is also used in various financial undertakings like issuing securities or strategic financial planning. Here Are The Four Core Business Valuation Methodologies1) Discounted Cash Flow AnalysisThe DCF is an intrinsic valuation method rooted in the company's financial statements.It projects a company's free cash flow post operational expenditures.Free cash flow distribution is at the discretion of the company's management and influences growth and valuation.In a DCF, future financial performance forms pro forma statements, estimating free cash flow over a forecast period, typically 5-10 years, plus a terminal value.The sum of free cash flow and terminal value, discounted by WACC, provides the enterprise's net present value and thus fair stock price.Bonus: Formula for FCFFreecashflow = NetIncome + Depreciation/Amortizationandothernon-cash*tems ± workingcapital − Capex − Dividends2) Comparable Companies Multiple Method (Comps)A relative valuation that leverages financial ratios of peer companies in the same sector to estimate the target's worth.Ratios like EV/EBITDA, P/E, and P/B among others are instrumental in this analysis.This approach's strength lies in its market-based objectivity, but comparability can be complex due to differing operational and financial strategies.3) Precedent TransactionsThis relative valuation method is hinged on previous M&A transaction prices.It gauges the market's willingness to pay premiums for control in similar industry transactions.Accuracy in this method is contingent upon the selection of comparable transactions based on industry relevance and recency.4) Asset-Based Valuation In this method, the valuation is the net of the company's assets after subtracting liabilities.The asset-based approach encompasses both asset accumulation and excess earnings methods, focusing on the market value of the company's assets.Key TakeawaysThe DCF offers an intrinsic valuation by forecasting a company's financial future based on its financial statements.Comparable companies analysis sets a relative value by benchmarking against similar entities in the industry.Precedent transactions consider the historical sale prices of similar companies in the market.Asset-based valuation focuses on a company's net assets, total assets minus liabilities.Understanding these core valuation methods greatly enhances your chances of landing a role in investment banking.Visit Financial Edge Training training for more free resources and expert led courses by ex-wall street professionals!

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