Company Valuation Methods

Tacettin İKİZ · March 31, 2025, 11:52:47 PM

Company Valuation Methods

Method	Formula / Basis	Pros	Cons
1. Discounted Cash Flow (DCF)	DCF = CF₁/(1+r)¹ + CF₂/(1+r)² + ... + CFₙ/(1+r)ⁿ	• Based on expected future cash flows • Widely used by analysts	• Requires detailed financial projections • Sensitive to discount rate changes
2. Comparable Company Analysis (CCA)	Valuation Multiple = Company Metric / Peer Metric	• Uses actual market data • Easier and faster than DCF	• May not reflect unique company traits • Heavily depends on comparables
3. Precedent Transactions Analysis	Valuation Multiple = Transaction Price / Relevant Metric	• Based on actual historical deals • Reflects real-world investor behavior	• Limited data availability • Subject to market timing
4. Asset-Based Valuation	Asset Value = Fair Market Value of Assets – Liabilities	• Focus on tangible value • Simple for asset-heavy companies	• Ignores intangibles and goodwill • Not ideal for dynamic businesses
5. Earnings Multiples	P/E = Price per Share / Earnings per Share EV/EBITDA = Enterprise Value / EBITDA	• Reflects profitability and sentiment • Enables peer comparisons	• Ignores nonrecurring factors • Multiples vary by industry
6. Liquidation Valuation	Liquidation Value = FMV of Assets – Liabilities	• Useful in distress situations • Reflects conservative value	• Not for healthy companies • Asset values often discounted
7. Weighted Average Cost of Capital (WACC)	WACC = (E/V) × Re + (D/V) × Rd × (1 – Tc)	• Key input for DCF • Measures actual cost of funding	• Sensitive to assumptions • Hard to estimate accurately

News:

Company Valuation Methods

Tacettin İKİZ