Pursuing a financial analysis course, currently working in the finance team of a firm or looking to make a career in the finance domain- it is important to gain complete knowledge of valuation and finance before working in the market. There are undoubtedly many sources to learn about valuation, however, if you prefer reading a book rather than attending a seminar or webinar, then here is a list of top books on valuation.
1. The Intelligent Investor by Benjamin Graham
Long considered as one of the most important books written on investing and valuation, the book has great quotes from the author that motivate you into a career in finance. If you have enrolled in a Financial Analyst Certification course, then this book is a must read to enlighten you about the strategies that will help you reach your goals. The concepts of value investing are explained in detail and most aspects of technical trading have been covered in the book. The book is the Bible of Finance and must adorn your bookshelf if you are thorough finance professional.
2. Theory of Investment Value by John Burr Williams
The book first printed in 1938, revolves around the idea that stocks are worth the present value of the dividends that are paid perpetually. The book highlights the investment value of a stock as the net present value of the future dividends it will reap. It features the highly popular, Discounted Cash Flow technique, which is the edifice of business valuation whilst making investment decisions.
Warren Buffet, the reputed investor was highly impressed by the book and the book features two major principles- the intrinsic value of a business can be taken out of discounted value during the course of its lifetime and a business that can afford to invest it’s earning at a higher rate than the applied discounted rate if it can afford to.
3. Measuring and Managing the Value of Companies by McKinsey & Company Inc
One of the best guides for corporate valuation, the book has been co-authored by Tim Koller, Marc Goedhart and David Wessels. The book solidifies the proven principles of value creation by negating the myths that prevail in the financial world.
The book equips executives to make a value-creating decision with case studies that analyze the historical performance of a company and then redrafting it to take a closer look at the performance. The book covers the topics of linking a company’s valuation multiples and estimating the cost of capital with practical tips. A must-have for investment bankers and investors to make pragmatic decisions.
4. Damodaran on Valuation: Security Analysis for Investment and Corporate Finance by Aswath Damodaran
A gifted professor and an authority on valuation, Aswath Damodaran delves deeply into three basic approaches to valuation which are discounted cash flow valuation, relative valuation, and contingent claim valuation. The book is filled with real-time examples of many international firms that deepen your understanding of the advantages and disadvantages of every model to help reader’s judge complex valuation scenarios.
5. Equity Asset Valuation by John Stowe
The book is a good read because of its coverage of finance and accounting concepts with every topic treated in detail for the benefit of the reader. It is good for students who want to strengthen their concepts of valuation before stepping into the finance domain. Most examples used to make it useful for finance students to learn the concept of implementing intrinsic stock valuation.