2.PEG method, which evolved from PE method, is the ratio of P/E ratio to profit growth rate, PEG= (share price/earnings per share)/(annual growth forecast per share). The biggest feature of PEG valuation is to consider growth.
3. PS method, that is, PS= company value/forecast sales; PS method is less used now, but it will be used frequently in previous years. It was often used in previous years because it invested more in the e-commerce industry.
4.DCF method, one of the absolute estimation methods, is also a commonly used method. Also known as the cash discount method. It will make some assumptions about the operation of the enterprise in the next 5-7 years, so as to calculate the income, cost and profit in the next few years. Then all cash flows are converted according to factors such as rate of return. As for the result of conversion, it is the current value of the enterprise.
Company valuation refers to evaluating the intrinsic value of the company by paying attention to the company itself. The intrinsic value of a company depends on its assets and profitability.
Importance of company value evaluation
Company valuation is the premise of investment, financing and trading. When an investment institution injects a sum of money into an enterprise, the rights it should have first depend on the value of the enterprise. How much is a growing enterprise worth? This is a very professional and complicated problem.
Financial model and company valuation are important methods of investment banks, which are widely used in various transactions.
Capital raising;
Merger and acquisition (merger &; Acquisition);
Company reorganization;
Sale of assets or business (divestiture)
The valuation of the company helps us to correctly evaluate the intrinsic value of the company or its business, thus establishing the basis for pricing various transactions.
At the same time, the company valuation is an important part of the due diligence of investment banks, which is conducive to the exemption of investment banks when problems arise.
For investment management institutions, company valuation based on financial model is not only an important research method, but also a basic skill for employees.
It can help us turn our understanding of industries and companies into specific investment suggestions; Forecast the company's strategy and the impact of its implementation on the company's value; In-depth understanding of the relationship between various variables that affect the company's value; Judging the influence of the company's capital transaction on its value; Emphasize the cultivation of quantitative research ability.
Adopting this method can not only promote the formation and development of the company's core competitiveness, but also help the company to become the maker of the rules of the domestic capital market. Financial model and company valuation are not the ultimate goal of our work, but the important tools we need to achieve our goal (that is, to make investment suggestions).
Value investors must attach importance to valuation. Without valuation, it is impossible to determine the margin of safety. We should give up the complicated academic valuation method, and even more, we should give up the absurd method of "EPS forecast +PE valuation" to simplify it.