Valuing Financial Firms, Part 1: What Is FCFE and How Does It Differ from FCFF?
In Part 8 of the Intrinsic Value series, we established that FCFE is the right tool for banks. Now let’s learn exactly how it works. In Part 8 of the…
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Valuing Financial Firms
A Five-Part Sub-Series
Banks, insurers, and other financial companies operate by rules that break the standard valuation models. This series shows you exactly how to value them.
Part 1
Part 2
Valuing Financial Firms, Part 2: From FCFE to Intrinsic Value — Building the Bank DCF
In Part 1, we learned how to calculate FCFE for a single year. Now we project it forward and turn it into a number you can act on. In Part…
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Valuing Financial Firms, Part 3: Normalizing Earnings for Insurance Companies
In Part 2, we flagged that insurance companies need a different kind of earnings normalization. Here’s exactly how to do it. In Part 2, we built a complete DCF for…
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Valuing Financial Firms, Part 4: Risk and the Discount Rate
Valuing Financial Firms, Part 4: Risk and the Discount Rate We have the cash flows. Now we need to know what they’re worth. That depends on risk — and risk…
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Valuing Financial Firms, Part 5: Putting It All Together
Valuing Financial Firms, Part 5: Putting It All Together You have everything you need. Now let's use it. Four posts ago, we said that valuing a financial firm requires different…
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Valuing Financial Firms, Part 6: A Real Bank, By the Numbers
Five posts of building tools. Now we take those tools into the real world — and see what the model actually tells us about a bank in our investment universe.…
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Valuing Financial Firms, Part 7: When to Sell and Why
You've built the model. You know what the number says. Now let's talk about what to do when the market disagrees — and when the model itself might be sending…
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