Chepakovich valuation model
What is the Chepakovich valuation model?
The Chepakovich valuation model is a valuation approach that’s based on the principal of discounted cash flow (DCF) analysis, which estimates future cash flow and delayed payments or “discounts” to reach a present value.
It also uses the time value of money concept, which highlights the benefit of receiving investment sooner rather than later.
Where have you heard about theChepakovich valuation model?
The Chepakovich valuation model was developed in 2000 by engineer and finance practitioner Alexander Chepakovich. It’s widely used to assess the investment potential of businesses and securities.
Not all investors will have heard of it, however you might be familiar with the discounted cash flow model on which it’s based on.
What you need to know aboutthe Chepakovich valuation model.
The Chepakovich valuation model can be used to measure growth stocks, no-growth or negative-growth companies, which makes it ideal for evaluating start-ups.
The model is relatively unique as it forecasts fixed and quasi-fixed costs separately to variable costs. It assumes that fixed costs will only increase at the rate of inflation or another predetermined rate, and sets variable costs as a fixed percentage of future revenue.
Where loss-making companies are concerned, the Chepakovich valuation model estimates intrinsic value, rather than relying on comparable valuation ratios which focus on market value.