Integrating Earnings Forecasts, Valuation, and Return Prediction: A Unified Framework
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This book addresses equity (enterprise) valuation and provides practical tools for investors and analysts. It presents a unified framework for forecasting future earnings, estimating intrinsic values, and deriving a proxy for expected returns. The author offers indicators of temporary mispricing and expected returns to investors in real time.
Each chapter is connected by a central idea: the value of equity and forecasts of future earnings are intrinsically linked in a simple, linear fashion. In line with long-standing capital market practices, the key to implementation lies in using benchmark industry averages of valuation parameters to assess an individual company within its industry. Importantly, all relevant industry-level valuation parameters are estimated simultaneously within the model framework.
This results in a cohesive system for forecasting one-year-ahead earnings, valuing equity, and predicting returns--all within a unified framework. This approach stands in contrast to traditional discounted cash flow (DCF) methods, where investment practitioners typically forecast future cash flows (dividends or earnings) and estimate the discount rate separately.
The book appeals not only to academics, but also provides practical insights for investment professionals, including fund managers engaged in stock-picking, business managers involved in M&A and IPO activities, and corporate managers making capital budgeting decisions.
Pengguo Wang is a professor of finance and accounting at the University of Exeter (UK). He received his PhD in Finance at Strathclyde University. Prior to joining the University of Exeter, he was a faculty member at Imperial College London and Bristol University (UK). Pengguo has been invited to give talks to the City of London for investment, accounting and legal practitioners on valuation. He has been involved with training through professional accounting associations such as the Institute of Chartered Accountants in England and Wales (ICAEW).
Pengguo has researched and published extensively in the areas of capital markets, financial reporting, derivative pricing and stock valuation. His research, teaching and consulting interests are at the interface of finance and accounting. His current research interests are focused on cost of capital, equity risk premium, market anomalies and fundamental valuation models and applications of machine learning, with particular reference to the links between financial statement information, risk and equity returns. His research has financially sponsored by ESRC, KPMG, ACCA, and The Institute for Quantitative Investment Research (INQUIRE-UK) and other grants.• Author(s): Clear | James • Publisher: Penguin • Publisher Imprint: Penguin Random House • Subject: General Books
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