Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • August 2000 (Revised July 2001)
  • Case
  • HBS Case Collection

Laura Martin: Real Options and the Cable Industry

By: Mihir A. Desai and Peter Tufano
  • Format:Print
  • | Language:English
  • | Pages:15
ShareBar

Abstract

CSFB equity research analyst Laura Martin publishes a report on valuing Cox Communications that introduces an innovative approach to valuation. She contends that EBITDA multiple analysis, typical for the cable industry, is flawed because it overlooks the value of the "stealth tier" (unused capacity on cable companies' fiber optic network). Martin proposes using real options valuation to impute value to the stealth tier, and she thereby arrives at a higher valuation for Cox stock. This provides the context for contrasting several valuation methodologies--traditional DCF analysis, regression-based ROIC and multiple analysis, and real option theory--and assessing how selected assumptions impact the various valuation techniques. In particular, Martin reviews ways in which the industry is evolving and students can think about how these changes impact which valuation method is most appropriate. More generally, this case provides a context for discussing the role of equity research analysts, highlighting all the constituencies they serve and how this can create conflicts of interest. Martin's application of real options theory provides an opportunity to evaluate where it works, where it doesn't, and why.

Keywords

Valuation; Innovation and Invention; Telecommunications Industry

Citation

Desai, Mihir A., and Peter Tufano. "Laura Martin: Real Options and the Cable Industry." Harvard Business School Case 201-004, August 2000. (Revised July 2001.)
  • Educators
  • Purchase

About The Authors

Mihir A. Desai

Finance
→More Publications

Peter Tufano

General Management
→More Publications

More from the Authors

    • November 2023
    • Faculty Research

    Aviva plc: Examining Net Zero

    By: Peter Tufano, Brian Trelstad and Matteo Gasparini
    • September 2023
    • Faculty Research

    Forecasting Climate Risks: Aviva’s Climate Calculus

    By: Mark Egan and Peter Tufano
    • January 2023
    • Faculty Research

    Thomas Buberl: Refounding AXA

    By: Hubert Joly, Mihir Desai and Amram Migdal
More from the Authors
  • Aviva plc: Examining Net Zero By: Peter Tufano, Brian Trelstad and Matteo Gasparini
  • Forecasting Climate Risks: Aviva’s Climate Calculus By: Mark Egan and Peter Tufano
  • Thomas Buberl: Refounding AXA By: Hubert Joly, Mihir Desai and Amram Migdal
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College