Re the issue of subsidies to green energy. This is cited as the only reason they can be competitive with oil. But this is the wrong way to think about the economics. In fact fossil fuel companies are the ones who have been subsided throughout their history because they have not paid for the negative externalities they cause (e.g., carbon emissions). So the real reason renewables can't compete is because the oil industry do not have to include the cost of polluting the atmosphere in what they charge at the pump. I hope the professor includes this perspective for future class discussions.
Hello! Professor, I think a company's true growth depends on the Free Cash Flow. And I have a logic behind it, The logic is Cash flow from Operation (CFFO) is the Cash version of Net Profit, & if the CAPEX exceeds the CFFO then there will be no cash available for the owner. So, after deducting CAPEX you'll get FCF & that's the owners earning. So, the FCF growth rate is the true measurement I think. Correct me if I'm wrong! Thank you.
@Nilay Mukhopadhyay it depends on what you are aiming for. The growth rates we look at during this course can refer to earnings or revenues or any other metric you like. I guess with "true growth rate" you are refering to the growth rate of capital for investors, is that correct? That depends on whether the company distributes its FCF or if it holds it, if the price of the company moves with its fundamentals and so on. If that is what you think it might be a "true growth rate", but whether your assumptions are realistic, is a different question. Although, I have a good understanding of what you mean. I like to measure the success of a year relative to my investment amount based on FCFE and calculate different ratios in relation to the share price I paid.
@@MasterXoergOwnsen @Iam Sir, I am not a smart guy, I'm just a middle class guy who want to build some money for the retirement. Sir, I have a question, I hope you will help me by clearing my doubts. Wonderfull businesses became cheap because of the pandemic. It's an exceptional time for investors without any doubt. Let's forget this pandemic effect. I want to know; How you determine a stock price will go up to it's intrinsic value (Including how you determine the growth & discount rates in your dcf model)?
@@NilayMukhopadhyay The answer to your question depends on the business's state - young, stable, distressed, growth, etc. If you want to know when the market reaches his "fair price," whatever that means, the answer is simple: nobody knows. Not Aswath Damodaran, not Warren Buffet, no Jim Simons, only magicians. You can get lucky, and the market closes the gap quickly, or you are unlucky, and you wait for years. This depends mostly on the difficulty of assessing the fair value of a company and also on the publicity the company has, etc. (easy to value stocks are less likely to have big gaps anyway) I recommend you to watch all the lectures of Prof. Damodaran, at least those relevant to you. This way, you will become less dependent and can hopefully create value for your retirement till you reach it.
How would one know whether the R&D expenses are productive or there is any possibility of success on R&D? These information are highly protected by such companies and are not easily available
I finally found someone worth subscribing in the world of investing on youtube.
Re the issue of subsidies to green energy. This is cited as the only reason they can be competitive with oil. But this is the wrong way to think about the economics. In fact fossil fuel companies are the ones who have been subsided throughout their history because they have not paid for the negative externalities they cause (e.g., carbon emissions). So the real reason renewables can't compete is because the oil industry do not have to include the cost of polluting the atmosphere in what they charge at the pump. I hope the professor includes this perspective for future class discussions.
Hello! Professor,
I think a company's true growth depends on the Free Cash Flow. And I have a logic behind it,
The logic is Cash flow from Operation (CFFO) is the Cash version of Net Profit, & if the CAPEX exceeds the CFFO then there will be no cash available for the owner.
So, after deducting CAPEX you'll get FCF & that's the owners earning.
So, the FCF growth rate is the true measurement I think. Correct me if I'm wrong!
Thank you.
@Pankaj Sadhwani That's why I look for only those companies which have a decent debt to equity ratio (Maximum 0.5).
@Nilay Mukhopadhyay it depends on what you are aiming for. The growth rates we look at during this course can refer to earnings or revenues or any other metric you like. I guess with "true growth rate" you are refering to the growth rate of capital for investors, is that correct? That depends on whether the company distributes its FCF or if it holds it, if the price of the company moves with its fundamentals and so on. If that is what you think it might be a "true growth rate", but whether your assumptions are realistic, is a different question.
Although, I have a good understanding of what you mean. I like to measure the success of a year relative to my investment amount based on FCFE and calculate different ratios in relation to the share price I paid.
@@MasterXoergOwnsen @Iam Sir,
I am not a smart guy, I'm just a middle class guy who want to build some money for the retirement.
Sir, I have a question, I hope you will help me by clearing my doubts.
Wonderfull businesses became cheap because of the pandemic. It's an exceptional time for investors without any doubt. Let's forget this pandemic effect.
I want to know;
How you determine a stock price will go up to it's intrinsic value (Including how you determine the growth & discount rates in your dcf model)?
@@NilayMukhopadhyay The answer to your question depends on the business's state - young, stable, distressed, growth, etc. If you want to know when the market reaches his "fair price," whatever that means, the answer is simple: nobody knows. Not Aswath Damodaran, not Warren Buffet, no Jim Simons, only magicians. You can get lucky, and the market closes the gap quickly, or you are unlucky, and you wait for years. This depends mostly on the difficulty of assessing the fair value of a company and also on the publicity the company has, etc. (easy to value stocks are less likely to have big gaps anyway)
I recommend you to watch all the lectures of Prof. Damodaran, at least those relevant to you. This way, you will become less dependent and can hopefully create value for your retirement till you reach it.
Thank you Professor for your words of wisdom.
Prof the co lost a lawsuit and have to pay $3 Billion.. How do I build that in DCF?
You discount the $3 bn from the payment year to the present and subtract that value from your company value.
How would one know whether the R&D expenses are productive or there is any possibility of success on R&D? These information are highly protected by such companies and are not easily available
You can try to assign probabilities and value it as an option. If you think there is high risk in failure you can consider this in your probabilities.