Valuing Public Equity

Dirk Schoenmaker and Willem Schramade
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Willem Schramade: Nyenrode Business University

Chapter 9 in Corporate Finance for Long-Term Value, 2023, pp 239-267 from Springer

Abstract: Abstract This chapter examines methods to derive the equity value of publicly listed companies. These equity valuation methods come in two forms: absolute and relative methods. Absolute valuation models are fundamental methods to calculate value by discounting cash flows from business activities or discounting dividends which are paid from realised profits. Relative valuation models determine the value of one company in comparison with another company with similar characteristics, taking the latter’s market value as a given. Fundamental valuation methods—through a deeper understanding of companies and their value drivers—are most suited to sustainability integration. This chapter shows how these methods can incorporate social and environmental factors, alongside financial factors, into equity valuation. Moreover, fundamental valuation methods are at the core of valuing social and environmental factors in their own right, as discussed in Chap. 5 .

Keywords: Absolute valuation methods; Accruals; Comparables methods; Discounted cash flow model (DCF); Dividend discount model (DDM); Enterprise value; Equity value; Equity valuation methods; ESG; ESG integration; Exchange-Traded Funds; Fair value; Fundamental analysis; Fundamental valuation methods; Materiality; Materiality assessment; Multiples valuation; Net present value (NPV); Passive investing; Payout ratio; Public equity; Price-earnings (P/E); Quant investing; Relative valuation methods; Sustainability integration; Terminal value; Valuation; Value driver; Value driver adjustments (VDA); Weighted average cost of capital (WACC) (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-35009-2_9

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