Question

how to valuate a company worth

Answer 1

There are four common methodologies to valuate companies worth:

1. Book Value: The simplest and usually the least accurate method is book value. The focus is entirely on the balance sheet and the book value of the asset minus relevant liabilities. While there are many flaws still it is used by many valuation experts.

2. Publicly Traded Comparables:

The public stock markets assess valuation to every company’s shares being traded. This provides a basis for determining the value of your company, particularly when compared to companies similar to yours.

3. Transaction Comparables:

The next approach for valuation follows a process similar to the publicly-traded comparable example above, only the focus is on recent transactions. By looking at the multiples of LTM and NTM revenue and EBITDA for recent transactions and applying those multiples to your business, you would arrive at the estimated value based on this method.

4. Discounted Cash flow:

While first three methods focusses on historical values and performances, discounted cash flow method solely driven by the projected performance of the firm into long term.This method derives the cash flow the company will produce into perpetuity, if applicable, and then discounts those cash flows back into today’s dollars (also referred to as net present value (NPV)).