In our segment on stock valuation, you were exposed to the dividend discount model (DDM) and Free Cash Flow (FCF) method to estimate a stock’s price. What about these two methods of equity valuation is different and what about them is the same? Use Figure  to compare and contrast the estimates for Kenneth Cole Productions using various methods to estimate the stock price. Which method do you prefer and why? Include at least two citations that support your response.

 

Valuation Method P/E Price/Book EV/Sales EV/EBITDA Constant Dividend Growth Discounted FCF 0 10 20 30 40 50 60 70 80 90 100 Value per Share ($)