An asset-based valuation of a company uses the estimates of the market or the fair value of the company’s assets and liabilities. This valuation method is appropriate for companies that have low proportion of intangible or off-the-books assets. It is commonly used for valuing private enterprises.
Other factors to consider:
Some examples when this method is not appropriate:
The tables below list the pros and cons of the different valuation models we have seen so far.
|Comparables Valuation Using Multiples
|Good predictor of future returns.
|Lagging numbers tell about past.
|Not always comparable across firms.
|Impacted by economic conditions.
|Might conflict with fundamental method.
|Sensitive to different accounting methods.
|Allows us to identify relatively underpriced securities.
|Based on PV of future cash flows.
|Inputs have to be estimated.
|Widely accepted and used.
|Estimates sensitive to inputs.
|Market values hard to determine.
|Works when assets have easily determinable market values.
|Market values often different from book values.
|Works well for companies that report fair values.
|Do not account for intangible assets.
|Asset values hard to determine during hyperinflation.