Uncertainty in Investing and Valuation: What if questions, Scenario Analysis and Simulations

Session on Uncertainty for the Motley Fool
It is natural to feel uncertain about your value estimates, once you are done valuing a company, and second guess yourself. In this session, I start with the basic Excel tools you can use to ask what if questions, but then quickly shift away from the spreadsheets to talking about uncertainty in valuation, categorizing that uncertainty and the tools that you can use to deal with uncertainty. With what-if analyses, I talk about deciding which variables to ask questions about and how to create break even tables with multiple variables. Moving on, I address the times when scenario analysis and decisions trees can be useful in dealing with uncertainty. Finally, I look at the power of simulations. In closing, denying the existence of uncertainty or cowering in its presence does not make it go away.
(At the start, I had trouble with the Goalseek function in solving for revenue growth. Don't ask me why, but it seems to work with the Solver function to yield a growth rate of 28.46% to get to the current stock price)
Slides: www.stern.nyu.edu/~adamodar/p...
Paper on probabilistic approaches:
My valuation spreadsheet: www.stern.nyu.edu/~adamodar/p...
(If you have trouble downloading, try switching browsers...)

[@TheWarmDown_MMA]

Prof. Damodaran has to be one of the best teachers I’ve ever seen. From his expertise to the method of teaching is fantastic.
Definitely adding anything his ever wrote to my book library.
Thank you Professor Damodaran

[@ahigithchowdhary1377]

ly

[@diegocharrycardenas457]

Deeply appreciate your help professor Aswath.

[@vivekrajup9701]

Thanks, professor, that was very insightful.

[@fredrikn3586]

Exited about learning better tools for investing!🙌

[@himanshuvikramsingh2491]

Thank you so much Professor!

[@baognguyen2599]

im simple man i see Prof. Damodaran i hit like

[@Vladimirunique]

Same here

[@luispacheco9683]

I agree (1:53:40), Prof Damodaran is the best!

[@moustafayounes1771]

Thanks professor, when valuing companies do you put any thoughts on analyzing “return on net tangible assets” which is a more precise metric than ROIC?
The reason I ask is that in Warren Buffet LTS that was one of his criteria mentioned to purchase a stock, in addition to the stock trading below the intrinsic value.

[@ami156]

Professor could also use solver for multiple variables and set parameters which would represent known uncertainties in your inputs and use this to calculate high low valuation estimates.

[@ami156]

Professor I don't necessarily think shortcuts are bad because as humans we have to make estimates nothing can be calculated perfectly. The issue is when there is attempt to rule out uncertainty as if it doesn't exist.

[@user-tg6zt4yx2b]

Hi professor, what is your source for the industry average beta page's statistics? I'm curious to see where my company is included in the list.

[@aperson1181]

Couldn't open the link for the excel valuations. Could you please post the alternative link?

[@marcwhite6267]

Where can I watch the November 2021 session he's referring to in the video?

[@rohanraj-sv8tb]

i m also not able to find....if u got do share the link...

[@levinab4644]

Where can I find the tesla valuation 1 hour 55 min youtube video?

[@cedricdubois4170]

Please update the link of the speadsheet

[@emanuelederiu5154]

valuation spreadsheet link doesn't work

[@harimohan2902]

I beieve that where inflaion go will depend on the wages of the workers .Are the companies paying inflation adjusted salaries ? Can people live with those salaries ? Will the people cut some expensive thing or services they use because of lower salary ?

[@RaDeIRhd]

Is the link the the spreadsheet actually working for anyone? For me it just does nothing

[@AswathDamodaranonValuation]

Try a different browser. It is working for me.

[@RaDeIRhd]

@@AswathDamodaranonValuation ​ It worked with Edge, thank you :)! I was using Chrome.

[@rohanraj-sv8tb]

can anyone help me out with link for (November 21 class discussed at 0.25)......intro to simple free cash flow /DCF

[@LovemyGTI]

Host opens video by referring to a video back in November 2021 (1:55) step by step intro to DCF model on Tesla. I can't find it on YT, anyone have a link?

[@missgetherown]

Did anyone find the November 2021 session they referenced in the video?

[@RecordCheese]

Can someone please direct me to the FCF model session? Thanks a lot

[@abhishekyadav-kv4ne]

Valuation spreadsheet is not working..

[@kuldeepraina7360]

Salutire to master manipulator Damodaran

[@frede6710]

finance- distribution with fat tails- no convergence- no centrality- no standard deviation- your averaging the unaverageable. go study some basic math and try again.