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Business Tools For Career Readiness

This document discusses three valuation methods: market valuation, multiples method, and discounted cash flow analysis. It focuses on market valuation, which values a publicly traded company based on its stock price multiplied by the number of outstanding shares. However, market capitalization alone is not usually considered the true market value as it is driven by investor sentiment and the stock price.

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Mauricio Huacho Checa
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32 views12 pages

Business Tools For Career Readiness

This document discusses three valuation methods: market valuation, multiples method, and discounted cash flow analysis. It focuses on market valuation, which values a publicly traded company based on its stock price multiplied by the number of outstanding shares. However, market capitalization alone is not usually considered the true market value as it is driven by investor sentiment and the stock price.

Uploaded by

Mauricio Huacho Checa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Business Tools for Career Readiness

Finance for
Non-Financial Professionals
Module 4

with David Standen, D.B.A.

Valuation Methods
1. Market Valuation
2. Multiples Method
3. Discounted Cash Flow (DCF) Analysis

1. Market Valuation
Simplest way to value a publicly traded firm

1. Market Valuation
Simplest way to value a publicly traded firm
Equity market value of company =
Price of a single share
x
Number of outstanding shares

Ex.) Market Valuation


GAP Inc. has
1,106,000 shares outstanding
A current market value of $43.10

Ex.) Market Valuation


GAP Inc. has
1,106,000 shares outstanding
A current market value of $43.10 per share

Market Cap for GAP Inc. =


1,106,000 shares x $43.10 / share =
$47,668,600

The Market Cap is:


Rarely considered to be the true market
value of a company for valuation purposes

The Market Cap is:


Rarely considered to be the true market
value of a company for valuation purposes
Driven by the stock price which is driven by
investors

The Market Cap is:


Rarely considered to be the true market
value of a company for valuation purposes
Driven by the stock price which is driven by
investors
Used to determine whether a stock is over
or under-valued

The Market Cap is:


Rarely considered to be the true market
value of a company for valuation purposes
Driven by the stock price which is driven by
investors
Used to determine whether a stock is over
or under-valued
Used in other, more thorough valuation
processes

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