Valuation Case Study – American Dental Partners

Here is a chance to test your valuation skills.   Remember there are two ways that are theoretically sound:

  1. Discounting ALL future cash flows back to their present value using an appropriate discount rate for risk (“DCF”). A DCF may be a theoretically correct method to value a company but extremely difficult in practice.  A slight change in assumptions and your method becomes similar to using the Hubbell Telescope, you are looking at a different galaxy. Small changes in discount rates and/or cash flows change your valuation drastically.
  2. A second method is what would the business trade for in a CASH transaction between two equally informed buyer and seller. Here you have a real transaction to anchor your valuation.

Do NOT look at the price of American Dental Partners, Inc. (NASDAQ:ADPI). Go to the documents and based on the financials try to figure out what you would pay for the entire business. Support your assumptions.

I will post the answer in a few days.

Michael Mauboussin: Challenges and Opportunities in Active Management And Using BAIT #MICUS

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For an overview of American Dental Partners, Inc. (NASDAQ:ADPI) go to the Value-Line here:

View the American Dental Partners, Inc. (NASDAQ:ADPI) 2010 annual report here:

If you are lost, then you can view past research reports on the company here at You will have to become a member but it is free. Once you login, type in American Dental Partners, Inc. (NASDAQ:ADPI) in the search box for companies and two research reports will pop up. The Value Investors’ Club (“VIC”) is highly recommended as a learning tool.

Good luck! Test your skills.

Via CSInvesting