Sign up  |  Log in

Equity Valuation Methods and Inferences

If all the methods of equity valuation yield varying results,

(1) how must I come to a conclusion of what value an equity security holds?

(2) and on what basis would I have to prefer one valuation method over another?

Kick start your CFA® Program prep with Top Instructors you’ll love and a course that offers free updates until you pass – We’ve got you covered.

Valuation is subjective, that’s what makes it unique.

Forget methods, even the same method, say discounted cash flow could yield varied results.

In fact for the very same reason, one is willing to sell the share at a said price while other is willing to buy.

Only time will tell !

If it is someone else who has done the valuation, look not for the method but the assumptions.

Be it intrinsic or relative, they all build in heavy assumptions.

From the outside, it just looks that the relative is w/o the assumptions, but in reality - assumptions are implicit.