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Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity – Book Review

Paul Pignataro’s book, Financial Modeling and Valuation: A Practical Guide to Investment Banking and Private Equity seeks to be a guide and handbook to investment banking and private equity practitioners. It is a valuable resource for those who are seeking entry into private equity or investment banking.

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To do this the author takes the example of Walmart. He assesses its current performance, forecasts future performance and estimates a target stock price. Using this example Pignataro helps the reader make important investment calls by using the tools and concepts provided in the book.

Is the stock investment a rational one? Is the stock price undervalued, over- valued or just right? These questions are answered in the book as it provides the tools that Wall Street analysts and investment bankers use.The book intends to provide an understanding of the financial modeling and valuation process and the required tool set to do an anlysis.

The book is structured into Financial Statements and projects; Valuation.
In part one Walmart’s historical financials are assessed and the techniques to make projections are understood in a step by step manner. By doing this the reader will understand how to extract modeling techniques and apply them to any investment.

The model built in part one is used to conduct a valuation analysis in part two.

Part One: Financial Statements and Projections

  • Income Statement
  • Cash flow statement
  • Depreciation Schedule
  • Working Capital
  • Balance Sheet
  • Debt schedule and model finalisation

Part Two: Valuation

  • Value
  • Discounted Cash Flow Analysis
  • Comparable company analysis
  • Precedent transaction analysis

Appendices include: model quick steps and financial hotkeys.

Paul Pigntaro is the founder of The New York School of Finance. He has also authored Investment Banking and Private Equity in Practice. He has worked at Morgan Stanley and at Thomas H. Lee Partners.

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