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Valuation methodologies overview
Advantages and disadvantages

Comparable company trading analysis
Description
• Compare the current trading level of a Company to its peers
• Specifically determine how the market has valued the earnings, cash flow, net asset value, assets or other characteristics of similar companies. Compare these ratios to the Company’s performance and/or use them to impute an aggregate market value of the Company
Advantages
• Market efficiency means that trading values in theory should reflect industry trends, business risk, market growth, etc.
• Values obtained can be a reliable indicator of the value of the Company for a minority investment (i.e., a non-control investment)
• Useful technique for assessing vulnerability: when fundamental vs. market value gap is large, vulnerability may be high
Disadvantages
• Always comparing apples to oranges. Truly comparable companies are rare and differences are hard to account for
• Thinly......

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Approximate Word Count: 1306
Approximate Pages: 6 (250 words per double-spaced page)

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