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Bridge over ocean
1 May 1998 Financial Analysts Journal Volume 54, Issue 3

A Simple Valuation Model and Growth Expectations

  1. Morris G. Danielson

A simple valuation model is presented in which a firm can invest in projects with
positive net present values for a limited number of years. Although prior models
have made this assumption, this model can be simplified to a concise,
easy-to-use form. The model can facilitate a broad understanding of the
expectations implied by a firm's stock price—for example, growth patterns
consistent with a firm's P/E—which can guide in-depth analysis of prices.

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