How to value a company?

All company hosted on AMB Connect platform will be private company. Valuing a private company hence are significant for investors to have a comparable indicative of the company worth. There are generally 4 widely used method to value a private company as follows:

Comparable Company Analysis (CCA):
CCA compares the private company to publicly traded firms in the same industry. Look at valuation ratios (like price-to-earnings or enterprise value-to-EBITDA) of these comparable companies.
Pros: Relies on market data, provides relative valuation.
Cons: Assumes comparable companies are truly similar.
Considerations: Choose relevant peers and adjust for differences.

Discounted Cash Flow (DCF):
Estimate future cash flows (revenue, expenses, taxes) and discount them to present value using a discount rate (usually cost of capital).
Pros: Considers future performance, intrinsic value.
Cons: Sensitive to assumptions (growth rates, discount rate).
Considerations: Be conservative with projections.

Precedent Transactions:
Analyze past acquisitions or sales of similar companies. Look at transaction prices relative to financial metrics.
Pros: Reflects real-world market transactions.
Cons: Limited data, may not account for unique circumstances.
Considerations: Adjust for differences between transactions and your company.

Direct Asset Valuation:
Assess the value of the company's assets (e.g., real estate, equipment, intellectual property).
Pros: Tangible and straightforward.
Cons: Ignores intangibles (brand, goodwill).
Considerations: Consider replacement cost and depreciation.

Practically, combining multiple methods can provide a more robust valuation.

Last Update: 22 July 2024