TIP725: First Principles of Valuation w/ Tim Koller
We Study Billionaires - The Investor’s Podcast Network
Intro
This chapter delves into the complexities of business valuation, emphasizing shareholder value creation and the importance of return on invested capital. It provides insights into valuation metrics and strategic decision-making for enhancing long-term value.
On today’s episode, Clay is joined by Tim Koller to discuss all things valuation.
Tim is the lead author of Valuation: Measuring and Managing the Value of Companies which is the #1 best-selling guide to business valuation. This book—now in its eighth edition—has sold more than one million copies, and is used as a textbook at top business schools such as Wharton School, University of Chicago, MIT, INSEAD, Tuck School of Business, and Northwestern University.
As a Partner at McKinsey & Company, Tim combines broad cross-sector experience with decades of service to clients in value creation, corporate strategy, capital-markets issues, and M&A transactions.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
01:45 - How companies create shareholder value.
05:13 - The common misconceptions related to creating shareholder value.
13:54 - How managers should think about return on invested capital.
28:08 - Why it’s so common for managers to not take a long-term approach.
33:16 - How return on invested capital impacts a company’s valuation.
46:30 - How Tim thinks about the vast differences in returns we’ve seen in the US relative to Europe.
And so much more!
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
BOOKS AND RESOURCES
- Join Clay and a select group of passionate value investors for a retreat in Big Sky, Montana. Learn more here.
- Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
- Tim’s book: Valuation.
- McKinsey’s website.
- McKinsey’s insights: McKinsey on Finance.
- Related Episode: TIP577: Valuation Masterclass w/ Aswath Damodaran.
- Follow Tim on LinkedIn.
- Follow Clay on LinkedIn & X.
- Check out all the books mentioned and discussed in our podcast episodes here.
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