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Stock Market Basics 92: Sensitivity Analysis, How Valuation Changes When Assumptions Change 3-Line Summary Sensitivity analysis shows how much a company’s valuation changes when key assumptions such as growth rate, discount rate, and profit margin change. It helps investors avoid treating DCF or PER valuation results as one fixed answer. Investors can use sensitivity analysis to compare optimistic, base, and conservative scenarios and check whether there is enough margin of safety. Recommended Keywords sensitivity analysis, valuation, DCF, discount rate, growth rate, margin of safety, intrinsic value, scenario analysis, PER, ROIC, WACC, financial statement analysis, stock market basics, long term investing Table of Contents What Is Sensitivity Analysis? Why Sensitivity Analysis Matters in Investing DCF and Sensitivity Analysis How Growth Rate Changes Affect Valuation How Discount Rate Changes Affect Valuation How Profit Margin Changes Affect Valuation Terminal Value and Sensitivity Ana...

  Stock Market Basics 86: WACC Explained — Understanding a Company’s Average Cost of Capital 3-Line Summary WACC means the weighted average cost a company pays to raise capital through equity and debt. If ROIC shows how much return a company earns on capital, WACC shows the minimum cost the company must overcome. Investors should analyze WACC together with ROIC, interest rates, debt levels, business risk, capital structure, and industry characteristics. Recommended Keywords WACC, weighted average cost of capital, cost of equity, cost of debt, ROIC, capital cost, discount rate, valuation, debt ratio, interest rates, financial statement analysis, investing basics, stock market basics, long term investing Table of Contents What Is WACC? WACC Formula Explained Why WACC Matters What Is Cost of Equity? What Is Cost of Debt? WACC and ROIC What a Low WACC Means What a High WACC Means Interest Rates and WACC Debt Ratio and WACC WACC and Valuation Why Industry Differences Matter Common Mist...

  Stock Market Basics 83: EV/EBITDA Explained — Measuring Enterprise Value Against Cash-Earning Power 3-Line Summary EV/EBITDA shows how many times a company’s enterprise value trades compared with EBITDA. While PER compares stock price with net income, EV/EBITDA compares total company value, including debt, with operating earning power. Investors should analyze EV/EBITDA together with debt, cash, capital expenditures, depreciation, industry structure, and free cash flow. Recommended Keywords EV EBITDA, EV/EBITDA explained, enterprise value, EBITDA, valuation, PER, PBR, operating cash flow, free cash flow, depreciation, net debt, investing basics, stock market basics, financial statement analysis Table of Contents What Is EV/EBITDA? Understanding EV and EBITDA Separately EV/EBITDA Formula Why EV/EBITDA Matters PER vs EV/EBITDA What a Low EV/EBITDA Means What a High EV/EBITDA Means Why EBITDA Is Not the Same as Cash Flow EV/EBITDA and Debt EV/EBITDA and Capital Expenditures Why Ind...

  Stock Market Basics 81: PER Explained — Understanding How Many Times Earnings a Stock Trades At 3-Line Summary PER , or price-to-earnings ratio, shows how many times a company’s earnings investors are paying for through the stock price. A low PER does not always mean undervaluation, and a high PER does not always mean overvaluation. Investors should analyze PER together with EPS quality, growth potential, industry structure, business cycles, and cash flow. Recommended Keywords PER, price to earnings ratio, earnings multiple, EPS, value investing, growth investing, stock valuation, stock market basics, investing basics, undervalued stocks, overvalued stocks, long term investing Table of Contents What Is PER? PER Formula Why PER Matters What a Low PER Means What a High PER Means PER and EPS PER and Growth Rates The Limits of Using PER for Undervaluation The Limits of Using PER for Overvaluation Why PER Differs by Industry Why PER Becomes Confusing in Cyclical Industries How to Anal...