Investment Valuation by Aswath Damodaran, professor of finance at NYU's Stern School of Business, is essential reading for any financial analyst or serious individual investor. Damodaran develops detailed explanations of how to estimate the value of any asset but focuses primarily on the valuation of common stocks using both intrinsic and relative methods.Intrinsic valuation views an asset's current value as the discounted sum of future flows of funds. Depending on the asset and the analyst's preferences, the future flow of funds could be dividends, earnings, cash flow (earnings plus non-cash expenses), or free cash flow (cash flow minus net capital expenditures). In developing the intrinsic valuation models, Damodaran carefully points out several of the problems that one can encounter: Estimating future growth rates, Selecting an appropriate discount rate, How to value an asset with a high current growth rate that is certain to moderate (since no asset can grow faster than the overall economy forever).Relative valuation compares measures of value across several similar assets to determine which are overvalued and which are under valued. The multitude of possible comparisons include the: Price to Earnings (PE) ratio, PE to Growth (PEG) ratio, Price to Book Value (PBV) ratio, Price to Sales (PS) ratio. Here again, Damodaran identifies many of the problems and constraints an analyst might encounter, especially the need to calculate the ratios in a consistent manner. For example, PE and PEG could be computed using earnings and growth rates as reported for the last fiscal year, current fiscal year, next fiscal year, trailing twelve months, next twelve months, or twelve months centered on the current date. The choice of the timeframe is less important than its consistent application. However, I have found that I'm personally more comfortable using an average growth rate calculated over about six years (three in the past, three in the future) to smooth out annual variations.The beauty of Investment Valuation is that it is mathematically rigorous but does not require any mathematical training beyond high school algebra. (OK, a little calculus would help in understanding growth rates and sums of infinite series, but it's really not essential.) The book is highly readable and free of typographical errors. It doesn't offer any half-baked formulas on how to get rich; it provides useful tools for making your own investment decisions. If you are looking for a rigorous book on investment valuation techniques, this is the top choice and a terrific bargain at Amazon's price.