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NYU finance professor Aswath Damodaran is widely respected for his work in valuation, and for his prescient calls on markets, including Apple’s top and Facebook’s IPO day trade. Something that Professor Damodaran emphasised in a recent lecture we attended was that valuing older public companies is not useful. There’s so much data out there, and everyone has been valuing it for so long that you’re not going to uncover anything new.
The real use for valuation is for young, high growth companies. It is a riskier and more difficult proposition, but the rewards can be great.
He recently applied these principles when he priced Facebook.
Luckily, Professor Damodaran puts all of his presentations online. This guide is titled The Dark Side of Valuation: Valuing young, high growth companies.