Continuing Value
(Valuing Mature Firms)

For how many years should we look into the future to obtain a meaningful firm valuation? And what happens with the firm afterwards? The module "Continuing Value" deals with these questions. It turns out that the market assumes a very long-term perspective when valuing assets. We therefore have to be able to understand the sources of long-term value and how to incorporate them in our analysis.

Course picture financial analysis

The module "Continuing Value" proceeds in 6 steps:


  1. The introductory chapter motivates the topic and shows how important it is to look beyond the, say, 5 to 7 years of explicit forecasts. 

  2. We introduce a simple model of a growing perpetuity to estimate continuing value, and we discuss the key value drivers of that model.

  3. We discuss the relation between growth, investment, and value creation in the long run, and we show how these considerations affect continuing value (terminal value).

  4. We show how to estimate "normalized" free cash flows and how to estimate continuing value in a consistent way, given the cosiderations from the previous sections.

  5. We show an alternative way to estimating continuing value using multiples (relative valuation).

  6. Based on all these considerations, we introduce a simple procedure to value mature companies with only 5 assumptions (view tool).


For each topic, there is a short reading assignment, followed by some review questions and practice examples.