Investment Valuation

Reviewed by Diario de un Inversor · UpdatedJune 13, 2026

Our review

Aswath Damodaran's Investment Valuation stands without real competition as the most comprehensive treatise on business valuation available in academic and professional circles. The work covers with mathematical rigour the three major approaches: discounted cash flows — including variants for loss-making, high-growth, or distressed companies — relative multiples, and real options valuation. Damodaran does not merely present formulas: he explains the assumptions underlying each model, their strengths, and the situations in which each fails. That intellectual honesty is precisely what distinguishes the book from manuals that present valuation as an exact science. Two caveats for the reader: first, this is a university textbook, dense and technical, requiring solid grounding in accounting and corporate finance; second, the 2002 edition does not incorporate more recent methodological debates around discount rates or equity risk premiums. For updated material, Damodaran freely publishes data and models on his academic website. As a reference work and foundational text on valuation, it is difficult to surpass.

Key takeaways

• No valuation model is universally correct: each method carries assumptions that make it more or less suited to a given type of company.
• The most common valuation error is not mathematical but the choice of unrealistic or internally inconsistent assumptions.
• Relative multiples are useful but only comparable when companies share similar growth and risk profiles.
• Valuation is an estimation exercise with inherent uncertainty, not an exact science with a single correct answer.

Fact

Damodaran is a finance professor at NYU Stern School of Business and publishes annual equity risk premium and sector beta data freely on his academic website.