Andrew Allentuck

Monday, March 11, 2002

Investment Valuation: Tools and Techniques for Determining the Value of Any Asset
by Aswath Damodaran
2d ed.; John Wiley & Sons, 2002
992 pages
ISBN 0-471-41488-3

Investment Valuation's revised edition couldn't have come at a better time. With markets shocked by accounting issues, the former, tidy agreements on what things are worth have come apart. Aswath Damodaran, Professor of Finance at New York University's Stern School of Business, provides the tools to set things right.

Make no mistake - this is not a lightweight course in trading or following stock price wobbles. It is, rather, a work of fundamental analysis that begins with a brief discussion of risk and then moves on to such basics as estimating equity value per share, measurement of price to earnings ratios, book value multiple, valuation of firms with negative earnings, measurement of value of private firms, options pricing, and discussion of finding models appropriate to various kinds of business.

The reader needs to be not only attentive, but numerate, for there is a good deal of algebra and some basic statistics in most chapters. There are short self-test quizzes at chapter ends.

Should the investor buy this book? As a defense against being bowled over by analysts' opinions, it is excellent medicine. As a tool for understanding firms in which one considers investing, it is vital. But be prepared for serious study. Lightweight this is not. Thorough it is.