Stock Valuation: An Essential Guide to Wall Street’s Most Popular Valuation Models

To be clear, this book is not intended for the casual investor, but is rather intended for anyone who wishes to work in an investment field. Although the discussions are based more on intuition than on the underlying math, stock valuation is a nontrivial undertaking. As such, we must discuss some difficult concepts. Despite this, I wrote the book to be accessible to those without substantial knowledge of finance or accounting principles.

There were three objectives that I kept in mind in choosing a style for the book. First, it would be a stand-alone book that does not require significant prior knowledge of accounting and finance concepts. Rather than assume (or hope) that the reader already understands the time value of money, the relationship between risk and return, and how to analyze financial statements, the book addresses those issues in depth. Second, the book does not focus solely on academic theories or solely on the practices of investment professionals, but rather joins those ideas together. In doing so, we could understand both the theoretical underpinnings of the practices of investment professionals and the difficulties those professionals face in applying the theories.

Third, to the extent possible, the book is conversational in nature, so the reader will not be overwhelmed with technical jargon and highly scientific arguments. Instead, concepts are presented in simple, understandable language that focuses on the important intuition. This does not mean that the book lacks rigor, but that the book’s highest priority is to communicate an understanding of the key intuition behind the topics—first and foremost, I wanted the reader to understand why investment professionals use various techniques, and what biases might be introduced in using them.