Company Valuation

Updated: Sep 13, 2019

Valuing a company or else projects within company is quite a challenging process. There are several benefits of following methodical process to value company or else projects. Some of these are

  • - Finding company's worth

  • - Investment worthiness of project that the management is proposing

  • - Possible acquisition as a solution

  • - Possible turnaround as a solution

  • - Merger with comparable as growth across regions, across functions ...

  • - Consolidation of splintered organisations to form centers of excellence.

  • - Growth

Various parties (Subject Matter Experts) are involved in fact finding activity to eventually conduct valuation. Technical knowledge of industry is a must so is understanding of the regional accounting principles.

For example, if we were to value an Exchange listed large organisation, following high level steps (for detailed steps please contact us via our Contact Us portal) are to be performed to find its Stock Price and Market Value:

  • - Review company website to understand its business

  • - Review recent news from reliable sources

  • - Discuss the company in detail with interested individuals

  • - Above steps should help build perception of the company in Valuers' mind

  • - Now thorough technical methodology comes into action

  • - For all the listed companies, financial statements that are submitted to respective regions' regulatory authority have to be published on company's website

  • - Review all financial statements (Balance Sheet, Income Statement, Cash Flow Statements for instance) (these are available on company's website or else common financial websites)

  • - Now comes theoretical / technical application of financial modelling that we have learnt in our Finance courses. (for really useful links to videos of reputed Valuation Gurus contact us).

  • - Take historical financial data for last 3 to 5 years

  • - Use this to extrapolate financial statements (Balance Sheets, Income Statement and Cash Flow Statements) for future 5 years

  • - Above step will require lot of assumptions to be made and eventual application of discount ratios.

  • - For extrapolated future numbers use Valuation Models (there are many valuation models available) to find free cash flows, Enterprise Value of the company and Stock Price of the company.

  • - This also requires study of comparable organisations.

  • - Reassurance of the Valuation is derived when stock price / enterprise value found by different (atleast 2 Valuation methods) procedures match.

Our attempt is to provide our readers brief of the work our team does.