SOTP Spreadsheet
How to use the tool
1. Find the ticker symbol:
Search for the company’s ticker symbol by typing “Company Name + Stock” on Google.
Copy the correct ticker symbol. If necessary, include the exchange ticker for accuracy. (See image below)
2. Enter assumptions:
Input your assumptions in the white cells. This is very important. This will drive your entire valuation and (potential) return.
3. Verify currency:
Check the currency. If it's incorrect, select the cells, go to 'Format' > 'Number,' and choose 'Custom Currency' to make adjustments.
4. Check calculations:
Many of the dark gold cells contain automatically calculated values. Do not edit these cells.
By following these steps, you can effectively utilize the SOTP tool for your analysis.
About the Sum of the parts
Understanding the individual value drivers within a holding company is essential for figuring out what the business is really worth.
The sum of the parts is not perfect, but it gives you an idea of a company's total value.
In investing, the goal is for the true value of a company to eventually become apparent. This happens eventually through a rising stock price, dividend payments, or share buybacks.
Pros and cons of the sum of the parts
Pros:
It makes it easier to figure out how much a business is worth by considering its unique qualities.
Helps identify which segments are the primary value drivers.
Is pretty easy to use and learn.
You can find (significant) undervalued firms and beat the market if you do your SOTP right.
Cons:
Limited availability of detailed financial data for each segment.
Wrong assumptions can lead to significant errors, particularly if they are overly optimistic or pessimistic.
The more segments and inputs involved, the higher the risk of making mistakes.
SOTP doesn't easily account for synergies between different segments, such as cost savings or revenue increases, that come from operating as a single entity.