How to value a company


The Cash Flow Discount

The method used in our valuations is the Discounted Cash Flows or DCF. This methodology is the most widespread among the Investment Banks and is recognized as the one that best approximates the real value of a Company when considering the Cash Flows generated by the Company (Intrinsic Valuation).

 

Our report mentions and explains the operation of this methodology for the understanding of any reader to whom our report may be directed. Conceptually, the Cash Flow Discount consists of projecting the Cash Flows that the company will generate in the future, updating them to the present value through a discount rate, which will give us the Company Value (Enterprise Value or EV) . Subtracting the current Net Financial Debt of the Company would obtain the Market Value of the Own Funds.

Other Methodologies to know how much a company is worth

Other methods equally used in the sector are valuations by multiples, whether they are on listed companies (whose selection must be very strict due to the diversification of activities, size, solvency, structure, etc.) or on comparable transactions (method with greater applicability that quoted since the multiples paid in a transaction include a control premium and are usually more similar to the company to be valued).

 

Typically, the valuations by multiples are usually made as a complement to the valuation by Cash Flow Discount making a weighting between them, thus collecting the intrinsic valuation of the Company (DCF) together with the valuations that are made in the companies of the sector (comparable multiples) ). That is why in order to be able to offer the client a valuation that best suits its needs, we use several methods in our valuations depending on each case. Cash Flow Discount, Comparable Multiples of Transactions (if applicable), Comparable Listed Multiples (if applicable), Settlement value (if applicable)