Business Valuation Approaches

The global economic outlook has become more uncertain due to the evolving conflict in the Middle East and the resulting energy shock, which is weighing on growth and adding to inflationary pressures. Global GDP growth is now projected at 2.9% in 2026 and 3.0% in 2027. The resilience of growth reflects strong technology investment, lower effective tariffs and momentum carried over from 2025. But the outlook remains uncertain and depends on current energy market disruptions proving temporary. ‪These projections are based on a technical assumption that energy prices evolve in line with futures markets pricing.‬ ‪There is signifiant downside risk to those projections.‬ Inflation pressures will persist for longer than previously expected. In the G20, inflation is now projected to be 4.0% in 2026, reflecting the surge in global energy prices. Given these challenges, central banks should remain vigilant and ensure that inflation expectations are well-anchored. Any measures to mitigate the economic impact of the energy shock must be targeted and temporary, considering most governments’ limited fiscal space. Increasing renewable energy generation and energy efficiency can enhance economic security while boosting resilience to future price shocks. Read more in our latest Interim #EconomicOutlook, released today: https://oe.cd/6pf

We’ve updated our #rate forecasts post-election, based on three main assumptions: 1) The #Fed will continue cutting rates, but may proceed more cautiously and maintain some optionality along the way; 2) The economy will continue to grow around trend near term; 3) A Republican sweep raises the prospects of fiscal expansion, which increases growth and inflation expectations. We still believe the direction of travel for interest rates is lower as any policy changes will likely take time to be finalized and implemented, the labor market continues to loosen, and the terminal rate has already repriced higher. But we now see the 10-year US Treasury yield trending towards 4% by June 2025, up from our previous forecast of 3.5%. Read more below.

P/E, P/B, EV/EBITDA, EV/Sales, Price/Sales... Confused about when to use what? SAVE this post Let's decode which sectors are valued using these metrics ▶️ P/E - Stable business, and low debt. FMCG, Auto, Tech etc ▶️ P/B - Banks and NBFCs, Basically any lending business ▶️ EV/EBITDA - Any Capital Intensive Business - Where Depreciation and Interest distort earnings. Metals, Capital Goods, Infrastructure, Telecom ▶️ Price/Sales - early stage businesses, where profits are not normalized, and Debt is low ▶️ EV/Sales - early stage businesses, where profits are not normalized, and Debt is high ▶️ Price/Cash Flow - This may be useful for companies where depreciation is high, and for those where cash flow is a better metric than earnings, especially in case of negative working capital. Can be used in conjunction with P/E to understand the working capital situation. ▶️ Sector specific multiples - Some sectors such as insurance get value on the comparison of Market Cap to the Embedded Value. Additionally, every sector can be evaluated on its revenue drivers. For example, we can look at EV/Unit for Autos, EV/Subscriber for Telecom and so on. Remember, the above are just guiding points. There is no rule that you have to use only one metric for a sector. You can use multiple and try and see the understand the trends in those. ----- Peeyush Chitlangia, CFA I help you build a career in valuation and investment banking Follow me for more concepts on Valuation!

Trade tensions & policy uncertainty come at a significant cost to global growth—one the world cannot afford.   Our new #GEP25 highlights the consequences of ongoing turmoil:    Global growth is projected to slow to 2.3% this year, its slowest pace since 2008 outside of global recessions.    Growth forecasts have been lowered in nearly 70% of economies across all regions and income groups.    By 2027, average global GDP growth for this decade is expected to be just 2.5%, the lowest rate since the 1960s.    Without sustained growth, developing countries won't be able to create jobs and reduce poverty.    Now, global growth could rebound faster than expected if major economies are able to mitigate trade tensions.    Read more: https://lnkd.in/ehtUDQ3B

▪ S&P 500 companies demonstrated healthy corporate fundamentals during 4Q 2024. Aggregate EPS grew 12% year/year, beating the consensus expectation of 8% growth at the beginning of reporting season. The median stock grew earnings by a more modest 7%. ▪ We forecast 2025 S&P 500 EPS will grow 11% year/year to $268. Our EPS estimate implies roughly -1% revisions to the top-down and bottom-up consensus forecasts. Earnings revisions appear to have inflected lower over recent weeks and earnings revision sentiment has fallen into negative territory. ▪ Tariffs are a key downside risk to our 2025 EPS forecast. Our economists expect tariff policies will raise the effective tariff rate by 5 pp. We estimate that every 5 pp increase in the US tariff rate would reduce our 2025 S&P 500 EPS estimate by roughly 1-2% and lower our estimated EPS growth rate by approximately 1 pp (to 10%). Heightened policy uncertainty represents downside risk to valuation because it raises the equity risk premium and implies downward pressure on fair value. Reporting season results incrementally affirmed our thematic views for 2025: ▪ The superior earnings growth and returns of the Magnificent 7 relative to the S&P 493 will narrow. The excess earnings growth of the Magnificent 7 relative to the S&P 493 declined to 19 pp in 4Q, the narrowest gap since 1Q 2023. Bottom-up consensus estimates imply the earnings growth premium will continue to decline to 6 pp in 2025 and 4 pp in 2026. ▪ Outsized investments in capex and R&D have supported the exceptional performance of US stocks during the past decade. In 2025, the Magnificent 7 companies will boost their capex by 31% year/year to $331 billion. In October, just four months ago, these companies were expected to spend $263 billion on capex (+13%). ▪ The AI evolution will transition from Phase 2 (infrastructure) to Phase 3 (enabled-revenues). Since the start of 4Q, consensus 2025 EPS revisions to the median Phase 3 stock have been positive compared with negative EPS revisions to the median Phase 2 stock.

Most people think valuation is just DCF + multiples. It’s not. Valuation is a decision-making tool, not a formula. This cheat sheet captures what many students miss Valuation exists because real decisions depend on it: • Litigation, restructuring, partnerships • Fundraising and investor negotiations • Buying or selling a business • Internal strategy decisions At the core, there are 3 valuation approaches: 1. Income Approach Value comes from future cash flows. Best for businesses with predictable earnings. 2. Market Approach Value comes from comparison. What are similar companies trading at? 3. Cost Approach Value comes from assets minus liabilities. Most useful for asset-heavy businesses. Then comes the engine of valuation: Discount rate & WACC. Get this wrong, and your entire valuation collapses. Get it right, and your assumptions finally make sense. DCF isn’t just a model. It’s a story built on: • Revenue growth • Cost structure • Terminal value assumptions • CAPEX • Working capital • Financing decisions And multiples aren’t shortcuts. They’re context checks. P/E, EV/EBITDA, P/B each works only when used in the right industry for the right reason. Valuation is not about memorizing methods. It’s about judgment, assumptions, and logic. If you understand why a method is used, you’ll never struggle in interviews or real deals. Save this. Revisit it often. This is the foundation of corporate finance. ----- Jeetain Kumar, FMVA® Founder, FCP Consulting Helping students break into consulting and finance PS: If you’re serious about consulting and want a clear, honest roadmap, the link in the comments is for 1:1 guidance. #finance #investment #valuation #consulting #impact

𝗧𝗵𝗲 𝗔𝗿𝘁 𝗮𝗻𝗱 𝗦𝗰𝗶𝗲𝗻𝗰𝗲 𝗼𝗳 𝗗𝗶𝘀𝗰𝗼𝘂𝗻𝘁𝗲𝗱 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄 𝗔𝗻𝗮𝗹𝘆𝘀𝗶𝘀: 𝗔 𝗖𝗙𝗢'𝘀 𝗡𝗼𝗿𝘁𝗵 𝗦𝘁𝗮𝗿 Discounted Cash Flow (DCF) analysis remains indispensable in high-stakes strategic decision-making. But are we leveraging its full potential? 𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗖-𝘀𝘂𝗶𝘁𝗲: 1. 𝗕𝗲𝘆𝗼𝗻𝗱 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻: DCF isn't just for M&A. It evaluates strategic initiatives, capital allocation, and even talent investments. 2. 𝗚𝗮𝗿𝗯𝗮𝗴𝗲 𝗶𝗻, 𝗚𝗮𝗿𝗯𝗮𝗴𝗲 𝗢𝘂𝘁: Your DCF model's quality is only as good as its inputs. Challenge your assumptions rigorously. 3. 𝗦𝗰𝗲𝗻𝗮𝗿𝗶𝗼 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴: In today's volatile markets, single-point DCF estimates are dangerous. Embrace probability-weighted scenarios. 4. 𝗥𝗶𝘀𝗸-𝗔𝗱𝗷𝘂𝘀𝘁𝗲𝗱 𝗗𝗶𝘀𝗰𝗼𝘂𝗻𝘁 𝗥𝗮𝘁𝗲𝘀: One size doesn't fit all. Tailor your discount rates to reflect project-specific risks and opportunities. 5. 𝗧𝗲𝗿𝗺𝗶𝗻𝗮𝗹 𝗩𝗮𝗹𝘂𝗲 𝗧𝗿𝗮𝗽: Don't let your model's endgame dominate the narrative. Scrutinise those long-term growth assumptions. 6. 𝗜𝗻𝘁𝗮𝗻𝗴𝗶𝗯𝗹𝗲𝘀 𝗠𝗮𝘁𝘁𝗲𝗿: Brand value, innovation potential, and organisational agility are hard to quantify but critical to include. 7. 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗲 𝗖𝗹𝗲𝗮𝗿𝗹𝘆: A DCF model is useless if your board doesn't understand it. Invest in clear, compelling visualisations. DCF is a powerful lens, but it's not the only one. Combine it with strategic intuition, market intelligence, and visionary thinking. What's your take? How is your organisation evolving its approach to DCF analysis in these uncertain times? #StrategicFinance #CorporateStrategy #ValueCreation

Highlights from our updated U.S. economic forecast following the U.S. trade announcement and recent market volatility:     📌 Under our revised baseline scenario, 2025 U.S. GDP growth would fall below 1%, nearly a percentage point below our previous forecast. That would put the economy at a potential “stall speed” that raises the specter of recession.    📌 We also foresee core inflation rising meaningfully above our previous forecast. The combination of stagnating activity and rising prices introduces the prospect of stagflation that would be a strong headwind for both stocks and bonds.    📌 The Federal Reserve may be challenged to lower rates amid a push and pull of lower growth and higher inflation. The Fed could be swayed by meaningful weakening in the labor market.    📌 Outside the U.S., we anticipate weakening economic growth, although softening demand will likely temper any inflationary impulses.    More on our revised outlook here: https://lnkd.in/errDfgay    #VanguardInsights 

The Process I Use to Find Comparable Companies for Valuation Over the years, I realised something quite simple. A good comp set is never an accident. It reflects how clearly you have understood the business in front of you. Whenever I teach valuation, this is one of the first habits I try to build in students. Slow the mind a bit. Think before you search. Let the comp set come from logic, not luck. This is the exact process I follow in real work and in the classroom. 1. Start with the company’s business model - Before touching any database, pause and write three quick lines. - What does the company really sell. - How does the cash actually come in. - Who pays for it and why. Once this is clear, half the irrelevant peers will automatically fall away. 2. Break the company into revenue engines Most companies earn through two or three different engines.Write each one down. - Products - Services - Projects - Recurring contracts Then ask which listed companies earn money in the same manner. You get small peer clusters that later become your core comp set. 3. Use geography as a careful filter Pull global peers first. Do not restrict yourself early. Then narrow the list. - Compare cost structures - Compare customer behaviour - Compare market maturity You will notice some regions behave more like your target company than others. 4. Build the long list before cleaning it Aim for twenty to thirty companies. Practical steps: - Use sector keywords on Capital IQ - Add product category keywords - Add revenue model keywords At this stage, you are only mapping the universe. No judgement yet. 5. Clean the long list using financial checks Now remove the noisy ones. - Check three year revenue trend - Check three year EBITDA trend - Check segment mix for unrelated activities - Check for one time shocks or restructuring If the story looks inconsistent, drop it. 6. Match scale and growth - Sort the list by revenue, EBITDA and growth. - Keep companies that fall within a sensible band of your target. - Small companies behave differently from giants, and the multiples will show it. 7. Rebuild the final comp set using valuation logic Now check the economics. - Compare margins - Compare capital intensity - Compare revenue mix Keep the companies whose numbers move in the same pattern as your target business. 8. Document your reasoning for every peer - Write one line for each final peer. Just a small justification. - This step builds defensibility. - It also makes you sound far more confident in interviews because you know exactly why each name is on your list. Your comp sets become cleaner, and your multiples start telling a story rather than confusing you. Follow Pratik S for Investment Banking Careers and Education. Next Live Batch starts from Dec 14th. Early Bird till Dec 7th. Dr. Bhumi Wizenius - Be Deal Ready

Early stage founders - do you believe you have little control over the #valuation of your company? I’m going to share 7 dimensions you can use to exert more control over it than you think: 1️⃣ Vision with Evidence - you have a long-term story and it might feel like a ceiling to valuation, but it also has to be connected to real traction. Let investors see that your vision isn't just aspirational, it's already unfolding through measurable progress. 2️⃣ Market Validation - big markets create space for big outcomes. Show that your target market is underserved, it’s growing, and that you know how you are going to capture it. Market size combined with early proof of demand reduces perceived risk dramatically. 3️⃣ Team Credibility – it’s your collective background, domain expertise, and ability to execute that matter. Investors back teams who demonstrate they can navigate uncertainty and build through challenges. Use prior wins, technical depth, or industry relationships to signal lower execution risk. 4️⃣ Revenue & Unit Economics - recurring revenue / repeat customers give more comfort to investors than one-off sales. Healthy margins and efficient customer acquisition show your business can scale profitably. Investors like to see a path to strengthening unit economics before they pour capital into your business. 5️⃣ Growth Momentum - speed compresses doubt. Consistent month-over-month growth, shortened sales cycles, or accelerating user adoption all demonstrate market pull. Solid momentum ahead of fundraising will push valuation multiples higher. 6️⃣ Governance & Transparency – call it ‘operational hygiene’ if you want, but a clean cap table, compliance discipline, and clear reporting all build confidence in the founder. Investors reward founders who reduce future friction and demonstrate operational maturity. 7️⃣ Strategic Partnerships - Alliances with corporates, regulators, or ecosystem players give you great external validation. They signal that credible third parties believe in your business. They’ll reduce market adoption risk. Valuation isn't awarded just on potential. It's earned by systematically reducing uncertainty and proving your business can scale. So, if you want to take control of your valuation story you have to focus on the signals that will matter most to investors. 💬 Which of these 7 dimensions do you think founders underestimate most? It’s worth remembering that, at early stage, valuation is more art than science. You have to give investors the right things to appreciate. Picture shows where else you can look for support.