What is the best way to learn valuation?

There is a great investment banking textbook by Rosenbaum that's helpful; we use it for my undergraduate IB class.

read, read, read. sign up for a modeling class.

Hey pal, thanks for the detailed reply. Actually, everything you wrote up there makes sense and it is rather simple to comprehend, but I still feel like I could not lay out everything for an interviewer. How in depth are the interviews for an internship? Will they actually have me build the model from scratch or do I just need to be able to talk about the concepts? Do they actually teach you anything when you get a job or do you hit the ground running? Thanks for your help chief.

Thanks a lot, this is really helpful

This was wonderful! This is how students should be introduced to Valuation concepts- so much easier!

In most interviews you will have to walk through a DCF and explain the differences between the other two main methods of valuation (precedent transactions, and company comparables)

Regarding on the job learning... I can only tell you what I have been told by friends in the industry. You will learn everything you need to know on the job. The amount of responsibility required can depend on how lean your deal team is, or the amount of deal flow...so that can increase the learning curve. But all of my friends have said their school work was only somewhat applicable.

To be honest, I don't think first year analyst do much valuation until at least a few months after starting. So, you will be able to handle it once you are required to do such work.

I mean dude, this stuff takes time. Try and find a friend who you can bounce ideas off of. Read the posts on here. It will accumulate slowly.

I have the same problem recently, and I think the main reason is that I don't have some fundamental knowledge about accounting

I've used Breaking Into Wall Street and I've had a tremendous success in learning from it. I didn't take any finance classes during undergrad and took only one accounting course. If you're ever stuck just email the guys at BIWS. They're always open to answering questions about the topics they teach about.

"Non-target school so this probably explains my incompetence" - Coming from another non-target who has made it in the industry.... literally go fuck yourself

Mooter:

I'm at a non-target school and so this probably explains my incompetence.

Fuck this line of thinking. Do not ever succumb to this. Most Ivy League kids are clueless about Accounting and Finance before they start preparing for interviews. The whole target vs. nontarget thing is a filtering mechanism. You need to be realistic about the pace at what you'll learn something that you haven't used before in a practical setting. Give yourself some credit. You may be cut out for the job, you may not. But it has very little to do with the school you attended.

Mooter:

Hello everyone,

I am a new member of this community. I am having trouble really learning the basics and getting my feet in the water. I have purchased the Breaking Into Wall Street Financial Modeling course but can't seem to understand anything related to valuation. I have tried to read the Vault guide and also the book by Pearl and Rosenbaum but still no luck. I have taken two accounting courses so far and did very well in them and am currently in a corporate finance course. I have no issues constructing and analyzing financial statements, but when it comes to valuation (DCF, Comps, etc) I can't seem to get it.

Does anybody have any suggestions or advice? I'm at a non-target school and so this probably explains my incompetence. Is there any resource that teaches all this shit in an easy to understand manner? Appreciate anything you guys have for me.

Go to damodarans site and print out his slides. Then take his corporate finance video class online. Then take the entire valuations class. Come back in 6 months - 1 year. You should be an expert. If not, then something is seriously wrong with you.

Quit with thinking you're somehow dumber than others because you are at a "non target". Can everyone stop the bullshit elitist crap already?-

In terms of non-target and modeling, I completely know where you're coming from. I just signed a FT IBD offer at a boutique (I personally didn't want to go bulge, but understand those who do) and I taught myself valuations and modeling. But nobody really teaches in depth modeling at undergraduate schools.

For me, I had constantly rereading articles, guides, practice models, etc. You won't understand at first. It is similar to learning a language and takes time and practice. See if you can get a DCF model that someone has built to practice. Rebuild it and trace their steps. This was how I learned modeling. Just immerse yourself in finance and read all you can. It will begin to make sense.

I also studied this stuff for interviews with a buddy. We would quiz each other on valuations and teach each other what we knew. His accounting skills were stronger than mine so he helped me there and I taught him basics behind DCF and LBO.

I had to build a DCF in an interview, but I am the only person I've heard of who has ever had to do this. I was given a 10-k and blank excel document, but I was evaluated based on my logic and how I progressed through the work. Not accuracy. Again, I have never heard of anyone else doing this.

At this interview, I was the only non-target, but I had better modeling skills than the target kids. To my knowledge, nobody really teaches modeling in undergrad. Nobody comes out of undergrad with the ability to build a full DCF, LBO, pitchbook, etc. This is learned from internships, self practice, and on the job. Just be able to understand the rationale behind each one.

You're a non-target. It is tough, but it can definitely be done. You just have to be willing to work harder and longer to get there than anyone else. The fact you're reaching out about learning valuations shows you're on the right path. Keep it up.

Read more and keep practicing "more you practice more you learn" it is the formula.

Damn, I didn't mean to offend any of the people on here at non-targets who made it to the big leagues. I realize I have self esteem issues and definitely need to work on that aspect of myself along with increasing technical knowledge. It's not like I'm the first one either from my school who had to endure this struggle. We've had several alumni break into IB, many with BB firms so I really don't have an excuse. Thanks to everyone for the advice and encouragement, y'all the real MVPs and we fuck with it in the South, you feel me?

personally, i suggest you take a step back and learn about how a company creates value. McKinsey's Valuation is a great starting point - a bit conceptual, but if you get that down you'll really understand not just how do you value something but what drives its value. it has a fundamental slant, but hey, so does ben graham.

cheers.

http://disgu.st/~jon/books/seth_klarman-margin_of_safety.pdf