Valuation Fundamentals
These fundamentals will help with creating valuations for firms, assets, or divisions. They are based on CFA principles and utilize Excel spreadsheet functions. You can use the same concepts with other spreadsheets, but they will need to have the ability to turn off iterative calculation or circular references, so LibreOffice will not work.
In the future, we will be adding a Python option using Pandas.
Methodologies
- Comparable Transactions (relative)
- Controlling interest
- Requires access to recent transactions that represent nearly identical assets
- Relies on other companies' and analysts' assessments of acquisition value
- Usually represents a starting point
- Trading Comparables Analysis (relative)
- Non-controlling interest
- Relies on a robust public market with transparency
- Simple and quick to implement
- Lacks robust analysis
- Discounted cash flow (DCF)(fundamental)
- Controlling or non-controlling interest
- Based on sound financial theory and hypothetically most accurate
- Difficult to implement
- Relies heavily on assumptions
- Final valuation is frequently heavily biased towards a terminal value from trading comparables analysis
- Leveraged Buyout Valuation (fundamental)
- Controlling interest
- Relies on assumed projections and synergies
- Difficult to implement
- Exit strategy is more important than other valuation methods