On valuations: it's back to basics amid Covid-19

CORPORATE finance guru Aswath Damodaran had some advice for the audience at the 73rd CFA Institute Annual Virtual Conference: Don't abandon valuation fundamentals during the Covid-19 crisis.

"It is precisely times like these that matter most," he said. "You need to go back to the first principles of valuation. Everything I have learnt about valuation has been in the context of a crisis."

With so much uncertainty around companies' future earnings growth, cash flows, and even their ultimate survival, it's tempting to give up on traditional equity valuation methods. Pre-crisis historical financial data seems useless and there's a wide range of predictions about the economy and individual companies for 2020 and beyond. But to value the S&P 500 Index and individual companies, Mr Damodaran urged investors to stick with traditional valuation tools with adjustments for the pandemic.