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The DDM method allows you to value a company by looking at the sum of all the future dividend payments that have been discounted back to the netpresentvalue. . Relative valuation compares a stock value to its competitors and peers within the same industry. The most popular ratio is the price to earnings ratio.
Analysts use financial metrics and multiples such as Price to Earnings (P/E), Price to Book (P/B), Enterprise Value to Sales (EV/Sales), Enterprise Value to EBITDA (EV/EBITDA), and Price to Book (P/B) ratios derived from trading data of similar public companies or deal pricing data of similar M&A transactions.
Market-Based Valuation Market-based valuation methods determine the value of a business by comparing it to similar companies in the market. The Comparable Company Analysis (CCA) compares key financial ratios and multiples, such as price-to-earnings (P/E) ratio or enterprise value-to-sales (EV/S) ratio, of similar publicly traded companies.
Discount Rate Discount Rate refers to the rate at which a stream of future cash flows is discounted to determine NetPresentValue. Multiple of Earnings Multiple of Earnings, similar to Multiple of EBITDA, refers to the multiple of a company’s earnings to establish the entity valuation of the company.
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