Aswath Damodaran: 8 Lessons For Valuing Young Growth Companies

Anyone can value stable, money-making mature companies, but a real test of valuation skill is when you have to evaluate “difficult” companies, according to Aswath Damodaran. In his lecture notes on valuation and calculating intrinsic value, Damodaran declares that valuing young companies, companies that don’t fit the accounting mold and companies that face substantial truncation risk is particularly challenging because there are always so many uncertainties to consider. Young growth firms are particularly tricky because they usually have limited financial history and small revenues as well as significant operating losses. A propensity for failure also makes these companies tough to…