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Stock Valuation: What it actually means?
Stock valuation is the process of estimating the intrinsic or fair market value of a company’s shares so that investors, owners or acquirers can make informed buy, sell or hold decisions. Consultants may use a combination of methods — discounted cash flow, trading comparables, transaction comparables and market-based multiples — and then reconcile the results, adjusting for control, liquidity, growth and risk differences. They also review the company’s earnings quality and disclosure so the valuation rests on sound numbers. This is particularly useful in private companies or thinly traded markets where price signals are weak. A properly documented valuation supports investment committees, auditors and regulators.
