Professors Russell Lundholm and Richard Sloan have a unique corporate finance text book titled “Equity Valuation and Analysis with eVal”. This has become a text book we now recommend to those who are interested in learning valuation but not in a formal MBA program or finance or valuation course because of its approach, structure and the resources provided in the Equity Valuation and Analysis website. Our corporate finance tutors teach equity valuation to MBAs and CFA students and professionals. While those enrolled in taught courses have prescribed text books, professionals who are looking to learn seek recommendations on a text book to follow and we are adding this text book to the list.
Unique Corporate finance/Valuation Textbook
There are many textbooks on corporate finance and valuation. We think this text book is unique because of the following reasons:
Focus on Equity Valuation
This book is built with a clear focus on equity valuation from the ground up. We believe that the entire corporate finance course should be built around the need to accurately measure value. GraduateTutor.com has an discounted cash flow valuation poster with a subtitle that says that valuation is the essence of corporate finance.
Clear Equity Valuation Stages
This corporate finance text book “Equity Valuation and Analysis with eVal” is built around three clear valuation stages:
Step 1) Understanding the past
Step 2) Forecasting the future
Step 3) Valuation
Although not called out separately, the first valuation stage is dealt with in detail in the first six chapters. Valuation students are walked through different components of information collection, understanding the business, accounting analysis, financial ratio analysis and cash flow analysis. The second valuation stage is dealt with in the next 3 chapters where students are introduced to structured forecasting, forecasting details and cost of capital. The third valuation stage is covered in the final three chapters which are valuation, valuation ratios and some complications related to valuation. This clarity allows students to understand how every activity undertaken during the course connects to the valuation goal.
Real Live Valuation Case Studies
To bring all these concepts together into action, Professors Russell Lundholm and Richard Sloan have generously provided 24 valuation case studies in the Equity Valuation and Analysis website. These case studies are popular corporate firms and expose students to information collection and 10Ks. The firms picked include both mature companies and start ups giving students a range of challenges to work on.
For those who want to test themselves, Professors Russell Lundholm and Richard Sloan have again generously provided 4 quizzes on the Equity Valuation and Analysis website.
Today with Open CourseWare there are many courses online but not many text books with corresponding lectures. Professor Sloans has hosted the valuation webcasts on his Berkeley Hass School of Business webpage.
Valuation Model ‘Software’
eVal – the Valuation Model is what makes this text book especially unique. This is a detailed equity valuation model provided on the Equity Valuation and Analysis website. Students only need to provide the historical financial statement numbers as an input and put in some forecast assumptions including the cost of capital assumptions and the model spits out a valuation. By providing a common model for students, it helps shift the focus from the Microsoft Excel modeling techniques to the valuation concepts around the forecasting assumptions and valuation parameters.
As if that wasn’t enough, Professors Russell Lundholm and Richard Sloan also include a Datamaker workbook that helps convert financial statements from different data sources into the appropriate input format for the eVal software models input format. The Datamaker workbook takes the output from databases such as WRDS, S&P Market Insight, Thompson, etc. and converts it into the eVal software models input format. So all a student has to do is to copy the data from the Datamaker workbook and paste it into the eVal workbook. This saves students significant amounts of time in handling and converting data into the eVal models input format.
There are drawbacks to providing these models to students. A single model will not be able to take into account the diverse nature of businesses. This the authors do acknowledge and mention that this can be used as a starting point. In addition, building a valuation model from scratch is a useful skill that students should eventually build. This can probably be taught in another class focused on financial modeling.
Professor Russell Lundholm
Professor Russell Lundholm is the Professor and Chair of the Accounting and Information Systems Division at the Sauder School of Business in Vancouver, Canada. He has also taught at the Stephen M. Ross School of Business at the University of Michigan and Stanford University. Professor Russell Lundholm did his Ph.D. in Business Administration and his M.S. in Statistics at the University of Iowa. He finished his B.S. Business Administration from the Oregon State University. Professor Russell Lundholm’s primary research interests are in Financial Statement Analysis and Forecasting Equity Valuation.
Professor Richard Sloan
Professor Richard Sloan is the Emile R. Niemela Chair in Accounting and International Business and a Distinguished Teaching Fellow at the Berkeley Hass School of Business. Professor Sloan has also taught accounting and finance at the Stephen M. Ross School of Business at the University of Michigan and the Wharton School at the University of
Pennsylvania. He did his Ph.D. and M.S. in Business Administration with a specialization in Accounting and Finance at the W.E. Simon Graduate School of Business Administration, University of Rochester. Professor Richard Sloan did his Bachelor of Commerce at the University of Western Australia. Professor Richard Sloan is a widely published author and has held editorial positions in numerous publications. In addition to his academic experience, Professor Sloan has also served as a Managing Director of Equity Research at Barclays.