Share Valuation

This section contains papers discussing how to determine the value of a security, which is critical to deciding whether a share is under or over valued, whether to invest in it or to continue to invest in it.


Title:        The Z Score and its use in the Investment Selection Process

Author:    Colin Farrier

Description:
Edward Altman adopted a mathematical technique called ‘discriminant analysis’ in order to combine several accounts ratios with a specific objective. This paper discusses the application of this technique to the Investment Selection Process.


Title:        Final Salary Pension Schemes – A Profit Problem for Companies     (published June 2014)   This paper is restricted to members only

Author:    Barry McConnell

Description:
This paper describes how pension scheme liabilities affect company valuations. The history of defined benefit pensions in the UK is presented, giving a clear insight into how they have been affected by legislative changes and changes in investment returns. Pointers are given to what to look for when assessing the value of a company from an investment perspective.


Title:        Chorion and Intangible Fixed Assets

Author:    Jim Shoesmith

Description:
Some accounting matters such as the write of intangible fixed assets, particularly impairment charges, can be so fundamentally important to investors’ views of a company that there may be a need to go further than the information in the annual report and accounts. A recent Warren Buffet Way meeting (7th June 2005) felt this was the case at Chorion. Our further investigation is important not only for investors in that company, but also for investors in other companies and for anybody who needs an understanding of company accounts. The matter is therefore considered in an article by Jim Shoesmith in the ‘fundamental analysis’ sub-section of the ‘papers section’ within the ‘members only’ part of this website. Jim wishes to express his thanks and appreciation to Nigel Milton of IFG and to Sue Murphy the Finance Director of Chorion for helping him so readily and so speedily.


Title:        International Financial Reporting Standards (IFRS)

Author:    Jim Shoesmith

Description:
Private investors, many of whom are not accountants, need to have some knowledge of these changes if they are to make good use of company accounts. This paper seeks to provide a very simple guide to the major changes.


Title:        A Comparison of Share Buy-Backs and Dividends

Author:    Paul Welton

Description:
Share buy-backs sound like a raw deal for investors - you get no dividend, yet money goes out of the company. But a simple analysis shows that there is theoretically no difference between a share buy-back and payment of a dividend.