This video shows how to reverse engineer a company's share price using "Goal Seek" in Microsoft Excel. To "reverse engineer" a company's share price means to back out assumptions made by investors about the company's forecasted cash flows, growth rate, or cost of capital.
For example, let's assume that you estimate the intrinsic pershare value of a company's equity using the Gordon Growth Model. The Gordon Growth Model calculates a company's share as follows:
forecasted dividends per share / (cost of equity growth rate) = share price
Let's assume that you are confident about the forecasted dividends per share and cost of equity for a company. If you also know the company's actual share price, you then know three of the four things in the equation above and can solve for the growth rate. Doing so will tell you the amount by which investors are implicitly expecting the company's dividends per share to grow each year given the current stock price.
Alternatively, if you're confident about the company's cost of equity and expected growth rate, and you can observe the company's actual share price, you can back out the amount of dividends per share that investors must be forecasting given the current stock price.
—
Edspira is the creation of Michael McLaughlin, an awardwinning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a highquality business education freely available to the world.
—
SUBSCRIBE FOR A FREE 53PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44PAGE GUIDE TO U.S. TAXATION
• A 75PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
* http://eepurl.com/dIaa5z
—
SUPPORT EDSPIRA ON PATREON
* / prof_mclaughlin
—
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSETLIABILITY MANAGEMENT
* https://edspira.thinkific.com
—
LISTEN TO THE SCHEME PODCAST
* Apple Podcasts: https://podcasts.apple.com/us/podcast...
* Spotify: https://open.spotify.com/show/4WaNTqV...
* Website: https://www.edspira.com/podcast2/
—
GET TAX TIPS ON TIKTOK
* / prof_mclaughlin
—
ACCESS INDEX OF VIDEOS
* https://www.edspira.com/index
—
CONNECT WITH EDSPIRA
* Facebook: / edspira
* Instagram: / edspiradotcom
* LinkedIn: / edspira
—
CONNECT WITH MICHAEL
* Twitter: / prof_mclaughlin
* LinkedIn: / profmichaelmclaughlin
—
ABOUT EDSPIRA AND ITS CREATOR
* https://www.edspira.com/about/
* https://michaelmclaughlin.com