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28400 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
A common technique to help avoid hitting the voice limit on other devices is resampling — basically merging separate sounds down into one new sample. This is also the technique for baking in any effects and modulation, which, given that the K.O. II can only manage one master effect at any one time makes the lack of resampling all the more obvious. Understandably, it’s possibly the biggest complaint among users I’ve seen so far (after fadergate of course).
There are ways around this, but it would involve recording out into another device and then sampling that back into the K.O. II and no one should have a sampler for their sampler, not in this economy. Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. |
28401 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
This is also the technique for baking in any effects and modulation, which, given that the K.O. II can only manage one master effect at any one time makes the lack of resampling all the more obvious. Understandably, it’s possibly the biggest complaint among users I’ve seen so far (after fadergate of course).
There are ways around this, but it would involve recording out into another device and then sampling that back into the K.O. II and no one should have a sampler for their sampler, not in this economy. Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. |
28402 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
This is also the technique for baking in any effects and modulation, which, given that the K.O. II can only manage one master effect at any one time makes the lack of resampling all the more obvious. Understandably, it’s possibly the biggest complaint among users I’ve seen so far (after fadergate of course).
There are ways around this, but it would involve recording out into another device and then sampling that back into the K.O. II and no one should have a sampler for their sampler, not in this economy. Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). |
28403 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
II can only manage one master effect at any one time makes the lack of resampling all the more obvious. Understandably, it’s possibly the biggest complaint among users I’ve seen so far (after fadergate of course).
There are ways around this, but it would involve recording out into another device and then sampling that back into the K.O. II and no one should have a sampler for their sampler, not in this economy. Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. |
28404 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Understandably, it’s possibly the biggest complaint among users I’ve seen so far (after fadergate of course).
There are ways around this, but it would involve recording out into another device and then sampling that back into the K.O. II and no one should have a sampler for their sampler, not in this economy. Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. |
28405 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
There are ways around this, but it would involve recording out into another device and then sampling that back into the K.O. II and no one should have a sampler for their sampler, not in this economy. Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. |
28406 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
II and no one should have a sampler for their sampler, not in this economy. Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. |
28407 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Teenage Engineering does have a decent track record of adding functionality via firmware updates — the company just added a new effect to the OP-1 Field as I wrote this — so fingers crossed.
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time. |
28408 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time.
This performative nature might be a burden for songs, but I found it to be a feature in other areas. |
28409 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Photo by James Trew / Engadget
While we’re on the topic of features the K.O. II doesn’t have, there doesn’t appear to be any kind of song mode. There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time.
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. |
28410 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
There are four sample “groups” that you can think of as tracks (drums, bass, lead and so on). Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time.
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). |
28411 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Each of these groups can hold up to 99 patterns and patterns can be up to 99 bars in length. The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time.
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. |
28412 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
The active patterns across the four groups can be saved as a “scene” and scenes can be triggered consecutively. But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time.
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. |
28413 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
But, importantly, there’s no way for that to happen automatically right now. This means if you wanted to tease a whole recorded song out of the K.O. II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time.
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter. |
28414 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
II you’ll have to either get clever with MIDI or trigger scenes and patterns manually in real time.
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. |
28415 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. II happen by accident. |
28416 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
This performative nature might be a burden for songs, but I found it to be a feature in other areas. On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. |
28417 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
On top of the master effects you also have 12 “punch in” effects that can be applied — or punched in — by holding down the FX key and then any of the 12 black pads. Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. |
28418 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. |
28419 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Each is marked with its effect name (Level, Pitch and so on). These punch-in effects express themselves differently based on the amount of pressure you apply, making it a very expressive experience. The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. |
28420 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine. |
28421 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
The effects on these keys also correspond to modulation tools when used with the fader. So FX+7 adds the “Level” punch-in effect (rhythmic gating) while Fader+7 will assign gain/level to the fader until you choose another modulator such as Attack or Low Pass Filter.
I swear, half of the things you learn about how to use the K.O. II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. |
28422 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
I swear, half of the things you learn about how to use the K.O. II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. Just small, cute and often a bit hidden features that aren’t necessary but are tons of fun. A common one is the inclusion of FM radio on the OP1/Field and OB 4 etc. |
28423 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
II happen by accident. Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. Just small, cute and often a bit hidden features that aren’t necessary but are tons of fun. A common one is the inclusion of FM radio on the OP1/Field and OB 4 etc. Or the video making tool in the app for the OP-Z. |
28424 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Yes, it’s in the manual, but I discovered you can solo groups by pressing the FX button and the corresponding group. You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. Just small, cute and often a bit hidden features that aren’t necessary but are tons of fun. A common one is the inclusion of FM radio on the OP1/Field and OB 4 etc. Or the video making tool in the app for the OP-Z. There was a brief moment of excitement when I spotted “loop mode from OB-4” on the K.O. |
28425 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
You can also press multiple buttons to “solo” multiple groups or sounds at the same time. With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. Just small, cute and often a bit hidden features that aren’t necessary but are tons of fun. A common one is the inclusion of FM radio on the OP1/Field and OB 4 etc. Or the video making tool in the app for the OP-Z. There was a brief moment of excitement when I spotted “loop mode from OB-4” on the K.O. II’s product page. |
28426 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
With a group or group solo’d you can then apply punch-in effects to create a lot of variations in real time. With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. Just small, cute and often a bit hidden features that aren’t necessary but are tons of fun. A common one is the inclusion of FM radio on the OP1/Field and OB 4 etc. Or the video making tool in the app for the OP-Z. There was a brief moment of excitement when I spotted “loop mode from OB-4” on the K.O. II’s product page. The hope being the two devices would interact somehow, but it appears that’s just a way of describing the looping feature that’s been borrowed from the OB-4. |
28427 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
With so many touches like this, I am starting to assume that Teenage Engineering envisioned the K.O. II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. Just small, cute and often a bit hidden features that aren’t necessary but are tons of fun. A common one is the inclusion of FM radio on the OP1/Field and OB 4 etc. Or the video making tool in the app for the OP-Z. There was a brief moment of excitement when I spotted “loop mode from OB-4” on the K.O. II’s product page. The hope being the two devices would interact somehow, but it appears that’s just a way of describing the looping feature that’s been borrowed from the OB-4.
As I write these closing thoughts, the second official firmware update (v1.1.1) has just been released. |
28428 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
II as a playful performative device rather than a linear song-making machine.
Photo by James Trew / Engadget
I’ve talked before about the sort of “magic” factor that Teenage Engineering sometimes hides into its products. Just small, cute and often a bit hidden features that aren’t necessary but are tons of fun. A common one is the inclusion of FM radio on the OP1/Field and OB 4 etc. Or the video making tool in the app for the OP-Z. There was a brief moment of excitement when I spotted “loop mode from OB-4” on the K.O. II’s product page. The hope being the two devices would interact somehow, but it appears that’s just a way of describing the looping feature that’s been borrowed from the OB-4.
As I write these closing thoughts, the second official firmware update (v1.1.1) has just been released. There’s nothing spicy in here like motion control or sampling the radio, but it’s confirmation of what I mentioned earlier about Teenage Engineering adding features after a product hits the shelves — such as the OP-1 Field’s vocoder synth that landed over six months after release or the fairly substantial 1.2.38 update for the OP-Z which came almost three years into its life. |
28429 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Or the video making tool in the app for the OP-Z. There was a brief moment of excitement when I spotted “loop mode from OB-4” on the K.O. II’s product page. The hope being the two devices would interact somehow, but it appears that’s just a way of describing the looping feature that’s been borrowed from the OB-4.
As I write these closing thoughts, the second official firmware update (v1.1.1) has just been released. There’s nothing spicy in here like motion control or sampling the radio, but it’s confirmation of what I mentioned earlier about Teenage Engineering adding features after a product hits the shelves — such as the OP-1 Field’s vocoder synth that landed over six months after release or the fairly substantial 1.2.38 update for the OP-Z which came almost three years into its life.
The K.O. |
28430 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
Or the video making tool in the app for the OP-Z. There was a brief moment of excitement when I spotted “loop mode from OB-4” on the K.O. II’s product page. The hope being the two devices would interact somehow, but it appears that’s just a way of describing the looping feature that’s been borrowed from the OB-4.
As I write these closing thoughts, the second official firmware update (v1.1.1) has just been released. There’s nothing spicy in here like motion control or sampling the radio, but it’s confirmation of what I mentioned earlier about Teenage Engineering adding features after a product hits the shelves — such as the OP-1 Field’s vocoder synth that landed over six months after release or the fairly substantial 1.2.38 update for the OP-Z which came almost three years into its life.
The K.O. II represents an opportunity for Teenage Engineering to do the unthinkable and create a series of more capable instruments that don’t cost Field-series levels of money. |
28431 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
II’s product page. The hope being the two devices would interact somehow, but it appears that’s just a way of describing the looping feature that’s been borrowed from the OB-4.
As I write these closing thoughts, the second official firmware update (v1.1.1) has just been released. There’s nothing spicy in here like motion control or sampling the radio, but it’s confirmation of what I mentioned earlier about Teenage Engineering adding features after a product hits the shelves — such as the OP-1 Field’s vocoder synth that landed over six months after release or the fairly substantial 1.2.38 update for the OP-Z which came almost three years into its life.
The K.O. II represents an opportunity for Teenage Engineering to do the unthinkable and create a series of more capable instruments that don’t cost Field-series levels of money. As a sampler, it’s great for beginners or those who love a more performative style. |
28432 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
II’s product page. The hope being the two devices would interact somehow, but it appears that’s just a way of describing the looping feature that’s been borrowed from the OB-4.
As I write these closing thoughts, the second official firmware update (v1.1.1) has just been released. There’s nothing spicy in here like motion control or sampling the radio, but it’s confirmation of what I mentioned earlier about Teenage Engineering adding features after a product hits the shelves — such as the OP-1 Field’s vocoder synth that landed over six months after release or the fairly substantial 1.2.38 update for the OP-Z which came almost three years into its life.
The K.O. II represents an opportunity for Teenage Engineering to do the unthinkable and create a series of more capable instruments that don’t cost Field-series levels of money. As a sampler, it’s great for beginners or those who love a more performative style. It’s not nearly as detailed and in-depth as something like Roland’s SP 404 or Native Instruments’ Maschine, but it was never going to be a rival to, well, anything really. |
28433 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
There’s nothing spicy in here like motion control or sampling the radio, but it’s confirmation of what I mentioned earlier about Teenage Engineering adding features after a product hits the shelves — such as the OP-1 Field’s vocoder synth that landed over six months after release or the fairly substantial 1.2.38 update for the OP-Z which came almost three years into its life.
The K.O. II represents an opportunity for Teenage Engineering to do the unthinkable and create a series of more capable instruments that don’t cost Field-series levels of money. As a sampler, it’s great for beginners or those who love a more performative style. It’s not nearly as detailed and in-depth as something like Roland’s SP 404 or Native Instruments’ Maschine, but it was never going to be a rival to, well, anything really. Fadergate aside, this is a promising product from a company that has tested the loyalty of its fans more than usual in recent years. |
28434 | Teenage Engineering's K.O. II sampler proves the company can do cost-friendly cool
The K.O. II represents an opportunity for Teenage Engineering to do the unthinkable and create a series of more capable instruments that don’t cost Field-series levels of money. As a sampler, it’s great for beginners or those who love a more performative style. It’s not nearly as detailed and in-depth as something like Roland’s SP 404 or Native Instruments’ Maschine, but it was never going to be a rival to, well, anything really. Fadergate aside, this is a promising product from a company that has tested the loyalty of its fans more than usual in recent years.
All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission. All prices are correct at the time of publishing. |
28435 | Fundamental Investing: The Art of Relative Valuation
The PE (price to earnings ratio) of a stock is 18. Is that cheap or expensive? Well, it depends. On what? Many things! Welcome to the world of relative valuation.
The findings from research done a decade earlier by Aswath Damodaran indicated that around 85 per cent of valuation done by equity research analysts and 50 per cent of corporate M&A transactions were based on relative valuation. So, what exactly is this relative valuation?
It is the art of attempting to determine the fair value of a stock based on how it is valued relative to many factors. So, whether the PE of a stock is 15 or 18 or 30, the only way you can make an assessment of whether it is cheap or expensive is by analysing this one number — against its growth prospects, peer company multiples, industry trading range, historical average PE, the prevailing interest rates, etc. |
28436 | Fundamental Investing: The Art of Relative Valuation
The PE (price to earnings ratio) of a stock is 18. Is that cheap or expensive? Well, it depends. On what? Many things! Welcome to the world of relative valuation.
The findings from research done a decade earlier by Aswath Damodaran indicated that around 85 per cent of valuation done by equity research analysts and 50 per cent of corporate M&A transactions were based on relative valuation. So, what exactly is this relative valuation?
It is the art of attempting to determine the fair value of a stock based on how it is valued relative to many factors. So, whether the PE of a stock is 15 or 18 or 30, the only way you can make an assessment of whether it is cheap or expensive is by analysing this one number — against its growth prospects, peer company multiples, industry trading range, historical average PE, the prevailing interest rates, etc.
Portfolio podcast: The art of valuing stocks Portfolio podcast: The art of valuing stocks
Let there be no doubt, valuation experts like Aswath Damodaran and many successful hedge fund managers believe that absolute valuation (which we discussed in the Big Story in bl.portfolio edition dated October 8) is the better way to arrive at the value of a stock. |
28437 | Fundamental Investing: The Art of Relative Valuation
So, what exactly is this relative valuation?
It is the art of attempting to determine the fair value of a stock based on how it is valued relative to many factors. So, whether the PE of a stock is 15 or 18 or 30, the only way you can make an assessment of whether it is cheap or expensive is by analysing this one number — against its growth prospects, peer company multiples, industry trading range, historical average PE, the prevailing interest rates, etc.
Portfolio podcast: The art of valuing stocks Portfolio podcast: The art of valuing stocks
Let there be no doubt, valuation experts like Aswath Damodaran and many successful hedge fund managers believe that absolute valuation (which we discussed in the Big Story in bl.portfolio edition dated October 8) is the better way to arrive at the value of a stock.
However, due to a combination of complexities involved in building appropriate models, insufficient information, time constraints and also the fact that there are hundreds of stocks you want to consider, it is just not possible to do a DCF ( discounted cash flow model) for all your stock investments, and hence relative valuation as an approach to picking stocks too is well accepted and widely prevalent. |
28438 | Fundamental Investing: The Art of Relative Valuation
Portfolio podcast: The art of valuing stocks Portfolio podcast: The art of valuing stocks
Let there be no doubt, valuation experts like Aswath Damodaran and many successful hedge fund managers believe that absolute valuation (which we discussed in the Big Story in bl.portfolio edition dated October 8) is the better way to arrive at the value of a stock.
However, due to a combination of complexities involved in building appropriate models, insufficient information, time constraints and also the fact that there are hundreds of stocks you want to consider, it is just not possible to do a DCF ( discounted cash flow model) for all your stock investments, and hence relative valuation as an approach to picking stocks too is well accepted and widely prevalent.
When you decide to buy or sell a stock based on its PE or P/B or EV/EBITDA or EV/Revenue or even EV/subscriber ratios, you are engaging in the art of relative valuation. |
28439 | Fundamental Investing: The Art of Relative Valuation
Portfolio podcast: The art of valuing stocks Portfolio podcast: The art of valuing stocks
Let there be no doubt, valuation experts like Aswath Damodaran and many successful hedge fund managers believe that absolute valuation (which we discussed in the Big Story in bl.portfolio edition dated October 8) is the better way to arrive at the value of a stock.
However, due to a combination of complexities involved in building appropriate models, insufficient information, time constraints and also the fact that there are hundreds of stocks you want to consider, it is just not possible to do a DCF ( discounted cash flow model) for all your stock investments, and hence relative valuation as an approach to picking stocks too is well accepted and widely prevalent.
When you decide to buy or sell a stock based on its PE or P/B or EV/EBITDA or EV/Revenue or even EV/subscriber ratios, you are engaging in the art of relative valuation. And it’s totally fine to be an investor relying on relative valuation to make your savings work for you, provided you approach it the right way and ensure adequate risk management. |
28440 | Fundamental Investing: The Art of Relative Valuation
However, due to a combination of complexities involved in building appropriate models, insufficient information, time constraints and also the fact that there are hundreds of stocks you want to consider, it is just not possible to do a DCF ( discounted cash flow model) for all your stock investments, and hence relative valuation as an approach to picking stocks too is well accepted and widely prevalent.
When you decide to buy or sell a stock based on its PE or P/B or EV/EBITDA or EV/Revenue or even EV/subscriber ratios, you are engaging in the art of relative valuation. And it’s totally fine to be an investor relying on relative valuation to make your savings work for you, provided you approach it the right way and ensure adequate risk management. In relative valuation, the broader you assess the valuation, ie assess valuation multiple against more parameters, the better the perspective you get. |
28441 | Fundamental Investing: The Art of Relative Valuation
However, due to a combination of complexities involved in building appropriate models, insufficient information, time constraints and also the fact that there are hundreds of stocks you want to consider, it is just not possible to do a DCF ( discounted cash flow model) for all your stock investments, and hence relative valuation as an approach to picking stocks too is well accepted and widely prevalent.
When you decide to buy or sell a stock based on its PE or P/B or EV/EBITDA or EV/Revenue or even EV/subscriber ratios, you are engaging in the art of relative valuation. And it’s totally fine to be an investor relying on relative valuation to make your savings work for you, provided you approach it the right way and ensure adequate risk management. In relative valuation, the broader you assess the valuation, ie assess valuation multiple against more parameters, the better the perspective you get.
In simple words, one way to understand the difference between absolute valuation (explained in last week’s edition) and relative valuation is this – absolute valuation is made up of an interesting story that is backed by credible and validated numbers, while relative valuation is made up of an interesting number backed by a credible and validated story. |
28442 | Fundamental Investing: The Art of Relative Valuation
When you decide to buy or sell a stock based on its PE or P/B or EV/EBITDA or EV/Revenue or even EV/subscriber ratios, you are engaging in the art of relative valuation. And it’s totally fine to be an investor relying on relative valuation to make your savings work for you, provided you approach it the right way and ensure adequate risk management. In relative valuation, the broader you assess the valuation, ie assess valuation multiple against more parameters, the better the perspective you get.
In simple words, one way to understand the difference between absolute valuation (explained in last week’s edition) and relative valuation is this – absolute valuation is made up of an interesting story that is backed by credible and validated numbers, while relative valuation is made up of an interesting number backed by a credible and validated story.
What are those numbers in relative valuation? Every number in relative valuation is the result of a number A divided by a number B. For example, PE is price of the stock divided by its earnings. |
28443 | Fundamental Investing: The Art of Relative Valuation
And it’s totally fine to be an investor relying on relative valuation to make your savings work for you, provided you approach it the right way and ensure adequate risk management. In relative valuation, the broader you assess the valuation, ie assess valuation multiple against more parameters, the better the perspective you get.
In simple words, one way to understand the difference between absolute valuation (explained in last week’s edition) and relative valuation is this – absolute valuation is made up of an interesting story that is backed by credible and validated numbers, while relative valuation is made up of an interesting number backed by a credible and validated story.
What are those numbers in relative valuation? Every number in relative valuation is the result of a number A divided by a number B. For example, PE is price of the stock divided by its earnings. These are all numbers that are used to compare against similar metrics of other stocks and assess the merits of the stock. |
28444 | Fundamental Investing: The Art of Relative Valuation
And it’s totally fine to be an investor relying on relative valuation to make your savings work for you, provided you approach it the right way and ensure adequate risk management. In relative valuation, the broader you assess the valuation, ie assess valuation multiple against more parameters, the better the perspective you get.
In simple words, one way to understand the difference between absolute valuation (explained in last week’s edition) and relative valuation is this – absolute valuation is made up of an interesting story that is backed by credible and validated numbers, while relative valuation is made up of an interesting number backed by a credible and validated story.
What are those numbers in relative valuation? Every number in relative valuation is the result of a number A divided by a number B. For example, PE is price of the stock divided by its earnings. These are all numbers that are used to compare against similar metrics of other stocks and assess the merits of the stock.
Before we proceed on using relative valuation to pick stocks, it is important to understand that you can do relative valuation using equity multiples or firm/enterprise multiples. |
28445 | Fundamental Investing: The Art of Relative Valuation
In relative valuation, the broader you assess the valuation, ie assess valuation multiple against more parameters, the better the perspective you get.
In simple words, one way to understand the difference between absolute valuation (explained in last week’s edition) and relative valuation is this – absolute valuation is made up of an interesting story that is backed by credible and validated numbers, while relative valuation is made up of an interesting number backed by a credible and validated story.
What are those numbers in relative valuation? Every number in relative valuation is the result of a number A divided by a number B. For example, PE is price of the stock divided by its earnings. These are all numbers that are used to compare against similar metrics of other stocks and assess the merits of the stock.
Before we proceed on using relative valuation to pick stocks, it is important to understand that you can do relative valuation using equity multiples or firm/enterprise multiples.
Equity multiples
If you check the balance sheet of any company, the liabilities side is primarily made up of two line items — shareholder funds and borrowings. |
28446 | Fundamental Investing: The Art of Relative Valuation
In simple words, one way to understand the difference between absolute valuation (explained in last week’s edition) and relative valuation is this – absolute valuation is made up of an interesting story that is backed by credible and validated numbers, while relative valuation is made up of an interesting number backed by a credible and validated story.
What are those numbers in relative valuation? Every number in relative valuation is the result of a number A divided by a number B. For example, PE is price of the stock divided by its earnings. These are all numbers that are used to compare against similar metrics of other stocks and assess the merits of the stock.
Before we proceed on using relative valuation to pick stocks, it is important to understand that you can do relative valuation using equity multiples or firm/enterprise multiples.
Equity multiples
If you check the balance sheet of any company, the liabilities side is primarily made up of two line items — shareholder funds and borrowings. To the contrary, a Profit and Loss statement has many line items — starting with revenue, followed by variable costs and then fixed costs and taxes. |
28447 | Fundamental Investing: The Art of Relative Valuation
What are those numbers in relative valuation? Every number in relative valuation is the result of a number A divided by a number B. For example, PE is price of the stock divided by its earnings. These are all numbers that are used to compare against similar metrics of other stocks and assess the merits of the stock.
Before we proceed on using relative valuation to pick stocks, it is important to understand that you can do relative valuation using equity multiples or firm/enterprise multiples.
Equity multiples
If you check the balance sheet of any company, the liabilities side is primarily made up of two line items — shareholder funds and borrowings. To the contrary, a Profit and Loss statement has many line items — starting with revenue, followed by variable costs and then fixed costs and taxes. The only claim that equity shareholders have for distribution or for appropriation amongst themselves is what is left after paying the taxes — net profit. |
28448 | Fundamental Investing: The Art of Relative Valuation
What are those numbers in relative valuation? Every number in relative valuation is the result of a number A divided by a number B. For example, PE is price of the stock divided by its earnings. These are all numbers that are used to compare against similar metrics of other stocks and assess the merits of the stock.
Before we proceed on using relative valuation to pick stocks, it is important to understand that you can do relative valuation using equity multiples or firm/enterprise multiples.
Equity multiples
If you check the balance sheet of any company, the liabilities side is primarily made up of two line items — shareholder funds and borrowings. To the contrary, a Profit and Loss statement has many line items — starting with revenue, followed by variable costs and then fixed costs and taxes. The only claim that equity shareholders have for distribution or for appropriation amongst themselves is what is left after paying the taxes — net profit.
So, if you are doing relative valuation based on equity multiples, it is important to ensure you divide the equity – ie price per share or market cap of the company by line items that apply to equity shareholders. |
28449 | Fundamental Investing: The Art of Relative Valuation
These are all numbers that are used to compare against similar metrics of other stocks and assess the merits of the stock.
Before we proceed on using relative valuation to pick stocks, it is important to understand that you can do relative valuation using equity multiples or firm/enterprise multiples.
Equity multiples
If you check the balance sheet of any company, the liabilities side is primarily made up of two line items — shareholder funds and borrowings. To the contrary, a Profit and Loss statement has many line items — starting with revenue, followed by variable costs and then fixed costs and taxes. The only claim that equity shareholders have for distribution or for appropriation amongst themselves is what is left after paying the taxes — net profit.
So, if you are doing relative valuation based on equity multiples, it is important to ensure you divide the equity – ie price per share or market cap of the company by line items that apply to equity shareholders.
Based on this, there are only 3 items that can be attributed to equity shareholders — net profit from P&L statement, book value or shareholder funds from the Balance Sheet, and the free cash flows to equity (FCFE) from the cash flow statement. |
28450 | Fundamental Investing: The Art of Relative Valuation
Equity multiples
If you check the balance sheet of any company, the liabilities side is primarily made up of two line items — shareholder funds and borrowings. To the contrary, a Profit and Loss statement has many line items — starting with revenue, followed by variable costs and then fixed costs and taxes. The only claim that equity shareholders have for distribution or for appropriation amongst themselves is what is left after paying the taxes — net profit.
So, if you are doing relative valuation based on equity multiples, it is important to ensure you divide the equity – ie price per share or market cap of the company by line items that apply to equity shareholders.
Based on this, there are only 3 items that can be attributed to equity shareholders — net profit from P&L statement, book value or shareholder funds from the Balance Sheet, and the free cash flows to equity (FCFE) from the cash flow statement. Any relative valuation multiples will be linked to these three items one way or the other. Any other metric could be wrong and misleading. |
28451 | Fundamental Investing: The Art of Relative Valuation
To the contrary, a Profit and Loss statement has many line items — starting with revenue, followed by variable costs and then fixed costs and taxes. The only claim that equity shareholders have for distribution or for appropriation amongst themselves is what is left after paying the taxes — net profit.
So, if you are doing relative valuation based on equity multiples, it is important to ensure you divide the equity – ie price per share or market cap of the company by line items that apply to equity shareholders.
Based on this, there are only 3 items that can be attributed to equity shareholders — net profit from P&L statement, book value or shareholder funds from the Balance Sheet, and the free cash flows to equity (FCFE) from the cash flow statement. Any relative valuation multiples will be linked to these three items one way or the other. Any other metric could be wrong and misleading.
For example, price by revenue or price by EBITDA is incorrect. Why? |
28452 | Fundamental Investing: The Art of Relative Valuation
To the contrary, a Profit and Loss statement has many line items — starting with revenue, followed by variable costs and then fixed costs and taxes. The only claim that equity shareholders have for distribution or for appropriation amongst themselves is what is left after paying the taxes — net profit.
So, if you are doing relative valuation based on equity multiples, it is important to ensure you divide the equity – ie price per share or market cap of the company by line items that apply to equity shareholders.
Based on this, there are only 3 items that can be attributed to equity shareholders — net profit from P&L statement, book value or shareholder funds from the Balance Sheet, and the free cash flows to equity (FCFE) from the cash flow statement. Any relative valuation multiples will be linked to these three items one way or the other. Any other metric could be wrong and misleading.
For example, price by revenue or price by EBITDA is incorrect. Why? How do you differentiate between two companies A and B — both having same market cap of ₹100 and similar in all means except for debt levels — same revenue (₹100) and same gross margin and same EBITDA margins of 20 per cent and thus same EBITDA of ₹20. |
28453 | Fundamental Investing: The Art of Relative Valuation
Based on this, there are only 3 items that can be attributed to equity shareholders — net profit from P&L statement, book value or shareholder funds from the Balance Sheet, and the free cash flows to equity (FCFE) from the cash flow statement. Any relative valuation multiples will be linked to these three items one way or the other. Any other metric could be wrong and misleading.
For example, price by revenue or price by EBITDA is incorrect. Why? How do you differentiate between two companies A and B — both having same market cap of ₹100 and similar in all means except for debt levels — same revenue (₹100) and same gross margin and same EBITDA margins of 20 per cent and thus same EBITDA of ₹20. But A has zero debt, while B has debt of ₹10. Since revenue or sales and EBITDA are same, if you do a market cap/revenue or Price /Sales, or marketcap/EBITDA, both companies will have the same valuation. |
28454 | Fundamental Investing: The Art of Relative Valuation
Any relative valuation multiples will be linked to these three items one way or the other. Any other metric could be wrong and misleading.
For example, price by revenue or price by EBITDA is incorrect. Why? How do you differentiate between two companies A and B — both having same market cap of ₹100 and similar in all means except for debt levels — same revenue (₹100) and same gross margin and same EBITDA margins of 20 per cent and thus same EBITDA of ₹20. But A has zero debt, while B has debt of ₹10. Since revenue or sales and EBITDA are same, if you do a market cap/revenue or Price /Sales, or marketcap/EBITDA, both companies will have the same valuation.
However, let’s assume depreciation is ₹10, interest cost is 10 per cent and taxes are zero. This means the net profit of A is ₹10, while that of B is ₹9. |
28455 | Fundamental Investing: The Art of Relative Valuation
Any other metric could be wrong and misleading.
For example, price by revenue or price by EBITDA is incorrect. Why? How do you differentiate between two companies A and B — both having same market cap of ₹100 and similar in all means except for debt levels — same revenue (₹100) and same gross margin and same EBITDA margins of 20 per cent and thus same EBITDA of ₹20. But A has zero debt, while B has debt of ₹10. Since revenue or sales and EBITDA are same, if you do a market cap/revenue or Price /Sales, or marketcap/EBITDA, both companies will have the same valuation.
However, let’s assume depreciation is ₹10, interest cost is 10 per cent and taxes are zero. This means the net profit of A is ₹10, while that of B is ₹9. Thus although both companies are similar in terms of Price/Revenue and Price/EBITDA, A is cheaper on the PE ratio – ie PE of A is 10 and PE of B is 11.1. |
28456 | Fundamental Investing: The Art of Relative Valuation
But A has zero debt, while B has debt of ₹10. Since revenue or sales and EBITDA are same, if you do a market cap/revenue or Price /Sales, or marketcap/EBITDA, both companies will have the same valuation.
However, let’s assume depreciation is ₹10, interest cost is 10 per cent and taxes are zero. This means the net profit of A is ₹10, while that of B is ₹9. Thus although both companies are similar in terms of Price/Revenue and Price/EBITDA, A is cheaper on the PE ratio – ie PE of A is 10 and PE of B is 11.1. On a relative valuation basis, you must choose A instead of B, but you would not have spotted it if you had used incorrect metrics.
Hence it’s very important to use the right multiples. |
28457 | Fundamental Investing: The Art of Relative Valuation
But A has zero debt, while B has debt of ₹10. Since revenue or sales and EBITDA are same, if you do a market cap/revenue or Price /Sales, or marketcap/EBITDA, both companies will have the same valuation.
However, let’s assume depreciation is ₹10, interest cost is 10 per cent and taxes are zero. This means the net profit of A is ₹10, while that of B is ₹9. Thus although both companies are similar in terms of Price/Revenue and Price/EBITDA, A is cheaper on the PE ratio – ie PE of A is 10 and PE of B is 11.1. On a relative valuation basis, you must choose A instead of B, but you would not have spotted it if you had used incorrect metrics.
Hence it’s very important to use the right multiples. When it comes to equity metrics, it always has to be price or market cap (or variations of the same) in numerator divided by line items attributable to equity holders (or variations of the same)
The accompanying table gives the commonly used equity multiples for relative valuation. |
28458 | Fundamental Investing: The Art of Relative Valuation
However, let’s assume depreciation is ₹10, interest cost is 10 per cent and taxes are zero. This means the net profit of A is ₹10, while that of B is ₹9. Thus although both companies are similar in terms of Price/Revenue and Price/EBITDA, A is cheaper on the PE ratio – ie PE of A is 10 and PE of B is 11.1. On a relative valuation basis, you must choose A instead of B, but you would not have spotted it if you had used incorrect metrics.
Hence it’s very important to use the right multiples. When it comes to equity metrics, it always has to be price or market cap (or variations of the same) in numerator divided by line items attributable to equity holders (or variations of the same)
The accompanying table gives the commonly used equity multiples for relative valuation.
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. |
28459 | Fundamental Investing: The Art of Relative Valuation
This means the net profit of A is ₹10, while that of B is ₹9. Thus although both companies are similar in terms of Price/Revenue and Price/EBITDA, A is cheaper on the PE ratio – ie PE of A is 10 and PE of B is 11.1. On a relative valuation basis, you must choose A instead of B, but you would not have spotted it if you had used incorrect metrics.
Hence it’s very important to use the right multiples. When it comes to equity metrics, it always has to be price or market cap (or variations of the same) in numerator divided by line items attributable to equity holders (or variations of the same)
The accompanying table gives the commonly used equity multiples for relative valuation.
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. You can use one or two metrics or a combination of many more metrics to assess which stocks are undervalued or overvalued. |
28460 | Fundamental Investing: The Art of Relative Valuation
Thus although both companies are similar in terms of Price/Revenue and Price/EBITDA, A is cheaper on the PE ratio – ie PE of A is 10 and PE of B is 11.1. On a relative valuation basis, you must choose A instead of B, but you would not have spotted it if you had used incorrect metrics.
Hence it’s very important to use the right multiples. When it comes to equity metrics, it always has to be price or market cap (or variations of the same) in numerator divided by line items attributable to equity holders (or variations of the same)
The accompanying table gives the commonly used equity multiples for relative valuation.
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. You can use one or two metrics or a combination of many more metrics to assess which stocks are undervalued or overvalued.
Depending on specific cases, you can use further variations to pick stocks. |
28461 | Fundamental Investing: The Art of Relative Valuation
On a relative valuation basis, you must choose A instead of B, but you would not have spotted it if you had used incorrect metrics.
Hence it’s very important to use the right multiples. When it comes to equity metrics, it always has to be price or market cap (or variations of the same) in numerator divided by line items attributable to equity holders (or variations of the same)
The accompanying table gives the commonly used equity multiples for relative valuation.
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. You can use one or two metrics or a combination of many more metrics to assess which stocks are undervalued or overvalued.
Depending on specific cases, you can use further variations to pick stocks. For example, during the 2003-2007 bull market, many textile stocks, for instance, Bombay Dyeing, turned out to be multibaggers. Was their textile business booming? Not really. |
28462 | Fundamental Investing: The Art of Relative Valuation
Hence it’s very important to use the right multiples. When it comes to equity metrics, it always has to be price or market cap (or variations of the same) in numerator divided by line items attributable to equity holders (or variations of the same)
The accompanying table gives the commonly used equity multiples for relative valuation.
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. You can use one or two metrics or a combination of many more metrics to assess which stocks are undervalued or overvalued.
Depending on specific cases, you can use further variations to pick stocks. For example, during the 2003-2007 bull market, many textile stocks, for instance, Bombay Dyeing, turned out to be multibaggers. Was their textile business booming? Not really. But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. |
28463 | Fundamental Investing: The Art of Relative Valuation
When it comes to equity metrics, it always has to be price or market cap (or variations of the same) in numerator divided by line items attributable to equity holders (or variations of the same)
The accompanying table gives the commonly used equity multiples for relative valuation.
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. You can use one or two metrics or a combination of many more metrics to assess which stocks are undervalued or overvalued.
Depending on specific cases, you can use further variations to pick stocks. For example, during the 2003-2007 bull market, many textile stocks, for instance, Bombay Dyeing, turned out to be multibaggers. Was their textile business booming? Not really. But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. So the markets started to factor value of the company based on market value of their land. |
28464 | Fundamental Investing: The Art of Relative Valuation
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. You can use one or two metrics or a combination of many more metrics to assess which stocks are undervalued or overvalued.
Depending on specific cases, you can use further variations to pick stocks. For example, during the 2003-2007 bull market, many textile stocks, for instance, Bombay Dyeing, turned out to be multibaggers. Was their textile business booming? Not really. But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. So the markets started to factor value of the company based on market value of their land. In such a case you can deviate from Price/Book multiple to price/market value of net assets (assets – net debt).
Similar is the case with holding companies. |
28465 | Fundamental Investing: The Art of Relative Valuation
Once the metrics and importance are understood, there are, as such, no limits to how you can use them to pick stocks. You can use one or two metrics or a combination of many more metrics to assess which stocks are undervalued or overvalued.
Depending on specific cases, you can use further variations to pick stocks. For example, during the 2003-2007 bull market, many textile stocks, for instance, Bombay Dyeing, turned out to be multibaggers. Was their textile business booming? Not really. But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. So the markets started to factor value of the company based on market value of their land. In such a case you can deviate from Price/Book multiple to price/market value of net assets (assets – net debt).
Similar is the case with holding companies. If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value. |
28466 | Fundamental Investing: The Art of Relative Valuation
Depending on specific cases, you can use further variations to pick stocks. For example, during the 2003-2007 bull market, many textile stocks, for instance, Bombay Dyeing, turned out to be multibaggers. Was their textile business booming? Not really. But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. So the markets started to factor value of the company based on market value of their land. In such a case you can deviate from Price/Book multiple to price/market value of net assets (assets – net debt).
Similar is the case with holding companies. If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value.
Enterprise value multiples
Enterprise value refers to total value of a company/business. |
28467 | Fundamental Investing: The Art of Relative Valuation
For example, during the 2003-2007 bull market, many textile stocks, for instance, Bombay Dyeing, turned out to be multibaggers. Was their textile business booming? Not really. But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. So the markets started to factor value of the company based on market value of their land. In such a case you can deviate from Price/Book multiple to price/market value of net assets (assets – net debt).
Similar is the case with holding companies. If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value.
Enterprise value multiples
Enterprise value refers to total value of a company/business. This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). |
28468 | Fundamental Investing: The Art of Relative Valuation
Was their textile business booming? Not really. But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. So the markets started to factor value of the company based on market value of their land. In such a case you can deviate from Price/Book multiple to price/market value of net assets (assets – net debt).
Similar is the case with holding companies. If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value.
Enterprise value multiples
Enterprise value refers to total value of a company/business. This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. |
28469 | Fundamental Investing: The Art of Relative Valuation
But the stocks were zooming because there was real estate boom and many textile mills had manufacturing facilities in prime real estate locations. So the markets started to factor value of the company based on market value of their land. In such a case you can deviate from Price/Book multiple to price/market value of net assets (assets – net debt).
Similar is the case with holding companies. If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value.
Enterprise value multiples
Enterprise value refers to total value of a company/business. This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. |
28470 | Fundamental Investing: The Art of Relative Valuation
In such a case you can deviate from Price/Book multiple to price/market value of net assets (assets – net debt).
Similar is the case with holding companies. If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value.
Enterprise value multiples
Enterprise value refers to total value of a company/business. This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. Sources of funding don’t matter.
Using EV, the value of equity (share price) is derived from the value of the business. |
28471 | Fundamental Investing: The Art of Relative Valuation
Similar is the case with holding companies. If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value.
Enterprise value multiples
Enterprise value refers to total value of a company/business. This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. Sources of funding don’t matter.
Using EV, the value of equity (share price) is derived from the value of the business. Since the capital structure of companies varies significantly, an EV approach enables valuing them on similar terms. |
28472 | Fundamental Investing: The Art of Relative Valuation
If you think there is a reasonable case for underlying value of assets to be unlocked and Holdco discount to shrink, like it has happened in bank holding companies in the last 2-3 years, then there is a case to move beyond book value to market value.
Enterprise value multiples
Enterprise value refers to total value of a company/business. This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. Sources of funding don’t matter.
Using EV, the value of equity (share price) is derived from the value of the business. Since the capital structure of companies varies significantly, an EV approach enables valuing them on similar terms. One can arrive at the value of the business first and then subtract net debt, to arrive at the equity value. |
28473 | Fundamental Investing: The Art of Relative Valuation
Enterprise value multiples
Enterprise value refers to total value of a company/business. This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. Sources of funding don’t matter.
Using EV, the value of equity (share price) is derived from the value of the business. Since the capital structure of companies varies significantly, an EV approach enables valuing them on similar terms. One can arrive at the value of the business first and then subtract net debt, to arrive at the equity value. The advantage with EV-based metrics is that you have more options to value a company.
Bear in mind, valuation accuracy is better the lower down the P&L and cash flow statement one can get to. |
28474 | Fundamental Investing: The Art of Relative Valuation
This total value as perceived by the market is represented by the sum of its market cap + net debt (includes minority interest). What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. Sources of funding don’t matter.
Using EV, the value of equity (share price) is derived from the value of the business. Since the capital structure of companies varies significantly, an EV approach enables valuing them on similar terms. One can arrive at the value of the business first and then subtract net debt, to arrive at the equity value. The advantage with EV-based metrics is that you have more options to value a company.
Bear in mind, valuation accuracy is better the lower down the P&L and cash flow statement one can get to. But there are many times when company profits are low, but its operational performance ie EBITDA is not bad. |
28475 | Fundamental Investing: The Art of Relative Valuation
What works in the case of EV is that it helps in doing a capital-agnostic analysis of a company. Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. Sources of funding don’t matter.
Using EV, the value of equity (share price) is derived from the value of the business. Since the capital structure of companies varies significantly, an EV approach enables valuing them on similar terms. One can arrive at the value of the business first and then subtract net debt, to arrive at the equity value. The advantage with EV-based metrics is that you have more options to value a company.
Bear in mind, valuation accuracy is better the lower down the P&L and cash flow statement one can get to. But there are many times when company profits are low, but its operational performance ie EBITDA is not bad. In such cases, as revenue and EBITDA continue to grow, operating leverage will result in PE growing much faster than the above two line items. |
28476 | Fundamental Investing: The Art of Relative Valuation
Whether a company is funded only with equity, or a combination of equity and debt, the total value of the business is the same. Sources of funding don’t matter.
Using EV, the value of equity (share price) is derived from the value of the business. Since the capital structure of companies varies significantly, an EV approach enables valuing them on similar terms. One can arrive at the value of the business first and then subtract net debt, to arrive at the equity value. The advantage with EV-based metrics is that you have more options to value a company.
Bear in mind, valuation accuracy is better the lower down the P&L and cash flow statement one can get to. But there are many times when company profits are low, but its operational performance ie EBITDA is not bad. In such cases, as revenue and EBITDA continue to grow, operating leverage will result in PE growing much faster than the above two line items.
For example, take the case of Bharti Airtel: at the start of FY22 (April ‘21) its trailing PE was negative/invalid due to losses in FY21. |
28477 | Fundamental Investing: The Art of Relative Valuation
Since the capital structure of companies varies significantly, an EV approach enables valuing them on similar terms. One can arrive at the value of the business first and then subtract net debt, to arrive at the equity value. The advantage with EV-based metrics is that you have more options to value a company.
Bear in mind, valuation accuracy is better the lower down the P&L and cash flow statement one can get to. But there are many times when company profits are low, but its operational performance ie EBITDA is not bad. In such cases, as revenue and EBITDA continue to grow, operating leverage will result in PE growing much faster than the above two line items.
For example, take the case of Bharti Airtel: at the start of FY22 (April ‘21) its trailing PE was negative/invalid due to losses in FY21. The stock would have been avoided if one went by PE alone. However, on trailing EV/EBITDA basis, it was trading at 10 times EV/EBITDA. |
28478 | Fundamental Investing: The Art of Relative Valuation
One can arrive at the value of the business first and then subtract net debt, to arrive at the equity value. The advantage with EV-based metrics is that you have more options to value a company.
Bear in mind, valuation accuracy is better the lower down the P&L and cash flow statement one can get to. But there are many times when company profits are low, but its operational performance ie EBITDA is not bad. In such cases, as revenue and EBITDA continue to grow, operating leverage will result in PE growing much faster than the above two line items.
For example, take the case of Bharti Airtel: at the start of FY22 (April ‘21) its trailing PE was negative/invalid due to losses in FY21. The stock would have been avoided if one went by PE alone. However, on trailing EV/EBITDA basis, it was trading at 10 times EV/EBITDA. When this was considered against its estimated next 2 years EBITDA CAGR of over 20 per cent, the valuation, combined with qualitative factors, made it an interesting buy. |
28479 | Fundamental Investing: The Art of Relative Valuation
Bear in mind, valuation accuracy is better the lower down the P&L and cash flow statement one can get to. But there are many times when company profits are low, but its operational performance ie EBITDA is not bad. In such cases, as revenue and EBITDA continue to grow, operating leverage will result in PE growing much faster than the above two line items.
For example, take the case of Bharti Airtel: at the start of FY22 (April ‘21) its trailing PE was negative/invalid due to losses in FY21. The stock would have been avoided if one went by PE alone. However, on trailing EV/EBITDA basis, it was trading at 10 times EV/EBITDA. When this was considered against its estimated next 2 years EBITDA CAGR of over 20 per cent, the valuation, combined with qualitative factors, made it an interesting buy. Since then, net profits have improved substantially as operating leverage played out. |
28480 | Fundamental Investing: The Art of Relative Valuation
But there are many times when company profits are low, but its operational performance ie EBITDA is not bad. In such cases, as revenue and EBITDA continue to grow, operating leverage will result in PE growing much faster than the above two line items.
For example, take the case of Bharti Airtel: at the start of FY22 (April ‘21) its trailing PE was negative/invalid due to losses in FY21. The stock would have been avoided if one went by PE alone. However, on trailing EV/EBITDA basis, it was trading at 10 times EV/EBITDA. When this was considered against its estimated next 2 years EBITDA CAGR of over 20 per cent, the valuation, combined with qualitative factors, made it an interesting buy. Since then, net profits have improved substantially as operating leverage played out.
At bl.portfolio we had recommended a buy on the stock based on this in April 2021 and the stock has returned 80 per cent since. |
28481 | Fundamental Investing: The Art of Relative Valuation
In such cases, as revenue and EBITDA continue to grow, operating leverage will result in PE growing much faster than the above two line items.
For example, take the case of Bharti Airtel: at the start of FY22 (April ‘21) its trailing PE was negative/invalid due to losses in FY21. The stock would have been avoided if one went by PE alone. However, on trailing EV/EBITDA basis, it was trading at 10 times EV/EBITDA. When this was considered against its estimated next 2 years EBITDA CAGR of over 20 per cent, the valuation, combined with qualitative factors, made it an interesting buy. Since then, net profits have improved substantially as operating leverage played out.
At bl.portfolio we had recommended a buy on the stock based on this in April 2021 and the stock has returned 80 per cent since. The stock would have been easily missed if PE was the metric used to spot the performers. |
28482 | Fundamental Investing: The Art of Relative Valuation
For example, take the case of Bharti Airtel: at the start of FY22 (April ‘21) its trailing PE was negative/invalid due to losses in FY21. The stock would have been avoided if one went by PE alone. However, on trailing EV/EBITDA basis, it was trading at 10 times EV/EBITDA. When this was considered against its estimated next 2 years EBITDA CAGR of over 20 per cent, the valuation, combined with qualitative factors, made it an interesting buy. Since then, net profits have improved substantially as operating leverage played out.
At bl.portfolio we had recommended a buy on the stock based on this in April 2021 and the stock has returned 80 per cent since. The stock would have been easily missed if PE was the metric used to spot the performers.
Hence EV-based metrics are options to consider as well when equity-based valuation multiples do not give a clear picture. |
28483 | Fundamental Investing: The Art of Relative Valuation
The stock would have been avoided if one went by PE alone. However, on trailing EV/EBITDA basis, it was trading at 10 times EV/EBITDA. When this was considered against its estimated next 2 years EBITDA CAGR of over 20 per cent, the valuation, combined with qualitative factors, made it an interesting buy. Since then, net profits have improved substantially as operating leverage played out.
At bl.portfolio we had recommended a buy on the stock based on this in April 2021 and the stock has returned 80 per cent since. The stock would have been easily missed if PE was the metric used to spot the performers.
Hence EV-based metrics are options to consider as well when equity-based valuation multiples do not give a clear picture. Where even EBITDA multiples are not clear, as was the case with many new-age company IPOs that were reporting losses even at the EBITDA level, investors have no option but to go further up the P&L to metrics like EV/revenue, or even outside of P&L to use metrics like EV/subscriber. |
28484 | Fundamental Investing: The Art of Relative Valuation
When this was considered against its estimated next 2 years EBITDA CAGR of over 20 per cent, the valuation, combined with qualitative factors, made it an interesting buy. Since then, net profits have improved substantially as operating leverage played out.
At bl.portfolio we had recommended a buy on the stock based on this in April 2021 and the stock has returned 80 per cent since. The stock would have been easily missed if PE was the metric used to spot the performers.
Hence EV-based metrics are options to consider as well when equity-based valuation multiples do not give a clear picture. Where even EBITDA multiples are not clear, as was the case with many new-age company IPOs that were reporting losses even at the EBITDA level, investors have no option but to go further up the P&L to metrics like EV/revenue, or even outside of P&L to use metrics like EV/subscriber.
As we mentioned earlier, relative valuation represents a number backed by a credible and well-validated story. |
28485 | Fundamental Investing: The Art of Relative Valuation
Since then, net profits have improved substantially as operating leverage played out.
At bl.portfolio we had recommended a buy on the stock based on this in April 2021 and the stock has returned 80 per cent since. The stock would have been easily missed if PE was the metric used to spot the performers.
Hence EV-based metrics are options to consider as well when equity-based valuation multiples do not give a clear picture. Where even EBITDA multiples are not clear, as was the case with many new-age company IPOs that were reporting losses even at the EBITDA level, investors have no option but to go further up the P&L to metrics like EV/revenue, or even outside of P&L to use metrics like EV/subscriber.
As we mentioned earlier, relative valuation represents a number backed by a credible and well-validated story. Hence, you can use non-P&L multiples. |
28486 | Fundamental Investing: The Art of Relative Valuation
Since then, net profits have improved substantially as operating leverage played out.
At bl.portfolio we had recommended a buy on the stock based on this in April 2021 and the stock has returned 80 per cent since. The stock would have been easily missed if PE was the metric used to spot the performers.
Hence EV-based metrics are options to consider as well when equity-based valuation multiples do not give a clear picture. Where even EBITDA multiples are not clear, as was the case with many new-age company IPOs that were reporting losses even at the EBITDA level, investors have no option but to go further up the P&L to metrics like EV/revenue, or even outside of P&L to use metrics like EV/subscriber.
As we mentioned earlier, relative valuation represents a number backed by a credible and well-validated story. Hence, you can use non-P&L multiples. So when you compare companies and invest in one based on EV/Subscriber, there must be a credible story backing future monetisation of the subscriber in a profitable manner. |
28487 | Fundamental Investing: The Art of Relative Valuation
The stock would have been easily missed if PE was the metric used to spot the performers.
Hence EV-based metrics are options to consider as well when equity-based valuation multiples do not give a clear picture. Where even EBITDA multiples are not clear, as was the case with many new-age company IPOs that were reporting losses even at the EBITDA level, investors have no option but to go further up the P&L to metrics like EV/revenue, or even outside of P&L to use metrics like EV/subscriber.
As we mentioned earlier, relative valuation represents a number backed by a credible and well-validated story. Hence, you can use non-P&L multiples. So when you compare companies and invest in one based on EV/Subscriber, there must be a credible story backing future monetisation of the subscriber in a profitable manner. But do bear in mind, the risks are higher and so may be the rewards or pain as the case may be. |
28488 | Fundamental Investing: The Art of Relative Valuation
Hence EV-based metrics are options to consider as well when equity-based valuation multiples do not give a clear picture. Where even EBITDA multiples are not clear, as was the case with many new-age company IPOs that were reporting losses even at the EBITDA level, investors have no option but to go further up the P&L to metrics like EV/revenue, or even outside of P&L to use metrics like EV/subscriber.
As we mentioned earlier, relative valuation represents a number backed by a credible and well-validated story. Hence, you can use non-P&L multiples. So when you compare companies and invest in one based on EV/Subscriber, there must be a credible story backing future monetisation of the subscriber in a profitable manner. But do bear in mind, the risks are higher and so may be the rewards or pain as the case may be. When the risks are higher, you must apply a higher margin of safety before choosing the stock. |
28489 | Fundamental Investing: The Art of Relative Valuation
Where even EBITDA multiples are not clear, as was the case with many new-age company IPOs that were reporting losses even at the EBITDA level, investors have no option but to go further up the P&L to metrics like EV/revenue, or even outside of P&L to use metrics like EV/subscriber.
As we mentioned earlier, relative valuation represents a number backed by a credible and well-validated story. Hence, you can use non-P&L multiples. So when you compare companies and invest in one based on EV/Subscriber, there must be a credible story backing future monetisation of the subscriber in a profitable manner. But do bear in mind, the risks are higher and so may be the rewards or pain as the case may be. When the risks are higher, you must apply a higher margin of safety before choosing the stock.
Another thing to bear in mind when it comes to EV-based valuation — any change in EV will impact only the equity value. |
28490 | Fundamental Investing: The Art of Relative Valuation
As we mentioned earlier, relative valuation represents a number backed by a credible and well-validated story. Hence, you can use non-P&L multiples. So when you compare companies and invest in one based on EV/Subscriber, there must be a credible story backing future monetisation of the subscriber in a profitable manner. But do bear in mind, the risks are higher and so may be the rewards or pain as the case may be. When the risks are higher, you must apply a higher margin of safety before choosing the stock.
Another thing to bear in mind when it comes to EV-based valuation — any change in EV will impact only the equity value. For example, if EV of a company is ₹100 and it has ₹50 in debt, then the value of its equity is ₹50. In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. |
28491 | Fundamental Investing: The Art of Relative Valuation
Hence, you can use non-P&L multiples. So when you compare companies and invest in one based on EV/Subscriber, there must be a credible story backing future monetisation of the subscriber in a profitable manner. But do bear in mind, the risks are higher and so may be the rewards or pain as the case may be. When the risks are higher, you must apply a higher margin of safety before choosing the stock.
Another thing to bear in mind when it comes to EV-based valuation — any change in EV will impact only the equity value. For example, if EV of a company is ₹100 and it has ₹50 in debt, then the value of its equity is ₹50. In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. The higher the leverage, more the impact of change in EV on the value of the stock (both ways). |
28492 | Fundamental Investing: The Art of Relative Valuation
So when you compare companies and invest in one based on EV/Subscriber, there must be a credible story backing future monetisation of the subscriber in a profitable manner. But do bear in mind, the risks are higher and so may be the rewards or pain as the case may be. When the risks are higher, you must apply a higher margin of safety before choosing the stock.
Another thing to bear in mind when it comes to EV-based valuation — any change in EV will impact only the equity value. For example, if EV of a company is ₹100 and it has ₹50 in debt, then the value of its equity is ₹50. In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. |
28493 | Fundamental Investing: The Art of Relative Valuation
But do bear in mind, the risks are higher and so may be the rewards or pain as the case may be. When the risks are higher, you must apply a higher margin of safety before choosing the stock.
Another thing to bear in mind when it comes to EV-based valuation — any change in EV will impact only the equity value. For example, if EV of a company is ₹100 and it has ₹50 in debt, then the value of its equity is ₹50. In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. An overvalued peer cannot be used to justify expensive valuation in one stock. |
28494 | Fundamental Investing: The Art of Relative Valuation
When the risks are higher, you must apply a higher margin of safety before choosing the stock.
Another thing to bear in mind when it comes to EV-based valuation — any change in EV will impact only the equity value. For example, if EV of a company is ₹100 and it has ₹50 in debt, then the value of its equity is ₹50. In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. An overvalued peer cannot be used to justify expensive valuation in one stock. This is what economist Larry Summers termed as Ketchup economists/economics. |
28495 | Fundamental Investing: The Art of Relative Valuation
Another thing to bear in mind when it comes to EV-based valuation — any change in EV will impact only the equity value. For example, if EV of a company is ₹100 and it has ₹50 in debt, then the value of its equity is ₹50. In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. An overvalued peer cannot be used to justify expensive valuation in one stock. This is what economist Larry Summers termed as Ketchup economists/economics. It was his sarcastic take on some of the highly paid economists and finance professionals who are concerned only with inter-relationships between prices of different financial assets. |
28496 | Fundamental Investing: The Art of Relative Valuation
For example, if EV of a company is ₹100 and it has ₹50 in debt, then the value of its equity is ₹50. In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. An overvalued peer cannot be used to justify expensive valuation in one stock. This is what economist Larry Summers termed as Ketchup economists/economics. It was his sarcastic take on some of the highly paid economists and finance professionals who are concerned only with inter-relationships between prices of different financial assets. Based on this approach, they conclude whether the price of an asset independently is efficient or not. |
28497 | Fundamental Investing: The Art of Relative Valuation
In this case, if you think EV can increase by 10 per cent, the value of equity will increase by 20 per cent, and the reverse is also true. The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. An overvalued peer cannot be used to justify expensive valuation in one stock. This is what economist Larry Summers termed as Ketchup economists/economics. It was his sarcastic take on some of the highly paid economists and finance professionals who are concerned only with inter-relationships between prices of different financial assets. Based on this approach, they conclude whether the price of an asset independently is efficient or not. If two bottles of ketchup sell for twice as much as one bottle (except for minor differences traceable to transaction costs), the market is efficient. |
28498 | Fundamental Investing: The Art of Relative Valuation
The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. An overvalued peer cannot be used to justify expensive valuation in one stock. This is what economist Larry Summers termed as Ketchup economists/economics. It was his sarcastic take on some of the highly paid economists and finance professionals who are concerned only with inter-relationships between prices of different financial assets. Based on this approach, they conclude whether the price of an asset independently is efficient or not. If two bottles of ketchup sell for twice as much as one bottle (except for minor differences traceable to transaction costs), the market is efficient.
The risk in this – it ignores the aspect of whether one bottle of ketchup is priced rationally. |
28499 | Fundamental Investing: The Art of Relative Valuation
The higher the leverage, more the impact of change in EV on the value of the stock (both ways).
Keep a weather eye on Ketchup Economics
Given the fact that relative valuation is based on comparison with peer multiples, investors must take measures to check whether the peer multiples are reasonable as well. An overvalued peer cannot be used to justify expensive valuation in one stock. This is what economist Larry Summers termed as Ketchup economists/economics. It was his sarcastic take on some of the highly paid economists and finance professionals who are concerned only with inter-relationships between prices of different financial assets. Based on this approach, they conclude whether the price of an asset independently is efficient or not. If two bottles of ketchup sell for twice as much as one bottle (except for minor differences traceable to transaction costs), the market is efficient.
The risk in this – it ignores the aspect of whether one bottle of ketchup is priced rationally. Nobel Laureate Paul Krugman once explained how the US housing bubble that precipitated the global financial crisis reminded him of ketchup economists. |
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