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Lesson 11 of 14

GGM, Leading P/E Ratio, and Trailing P/E Ratio

  • The principles of GGM can be applied to derive Leading and Trailing price to earnings ratios.
  • Leading P/E Model: Based on future earnings.

P0/E1 = (Div1/Earning1)/(rce - g) = k/(rce - g)

Where k is the dividend payout ratio and g assumes that earnings growth and dividend growth are equal rates.

  • Trailing P/E Model: Slight variation based on current dividend and current earnings.

P0/E0 = (Div0 × (1+g) / Earning0)/(rce - g) = (k×(1+g))/ (rce - g)

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Present Value of Growth Opportunities (PVGO)

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Multi-Stage Dividend Discount Models

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Equity Analysis Part 2

14 lessons

Lessons

1
Equity Analysis Part 2 - Introduction
2
Porter’s Five Competitive Forces
3
Industry Analysis
4
Supply and Demand Analysis
5
Financial Projections in Emerging Markets
6
Cost of Capital in Emerging Markets
7
Cash Flows: Dividends vs. Free Cash Flows vs. Residual Income
8
Dividend Discount Model (DDM)
9
Gordon Growth Model (GGM)
10
Present Value of Growth Opportunities (PVGO)
11
GGM, Leading P/E Ratio, and Trailing P/E Ratio
12
Multi-Stage Dividend Discount Models
13
H-Model for Valuing Growth
14
Sustainable Growth Rate
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