What is valuation analysis? (in terms of an investment management job)?

Valuation analysis in investment management is determining a value that a company is worth. Usually using the discounted cash flow method (DCF), asset management analysts create a model in excel that maps out what is happening within the company on a financial basis. Historical years of data are modeled, and using assumptions on future sales, growth rates, and other financial metrics, future years of financial data are projected in the model. On a very general basis, a popular way to determine a company's value is to take the present value of future cash flows to the firm.

Assuming that you have some concept of accounting, cash flows for each year are calculated as follows:
EBIT x (1 - Tax Rate) + Depreciation & Amoritization - Capex +/- change in Net Working Capital.

After you discount the cash flows at your required rate of return (determined by the Capital Asset Pricing Model: Rate = RiskfreeRate + Beta x [MarketRate - RiskfreeRate]), you will have the present value of the company. Divide that value by the total diluted shares of stock outstanding and you will get the fair price per share of stock, based on your valuation.

Because I am not familiar with your current level of understanding, I hope this was neither too simple nor too complex for you. Feel free to email me with questions and good luck!

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