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In economics, valuation using multiples, or "relative valuation", is a process that consists of: identifying comparable assets (the peer group) and obtaining market values for these assets. converting these market values into standardized values relative to a key statistic, since the absolute prices cannot be compared.
The First Chicago method or venture capital method is a business valuation approach used by venture capital and private equity investors that combines elements of both a multiples-based valuation and a discounted cash flow (DCF) valuation approach. [1]
The most common method for individual equities is based on comparing certain financial ratios or multiples, such as the price to book value, price to earnings, EV/EBITDA, etc., of the equity in question to those of its peers. This type of approach, which is popular as a strategic tool in the financial industry, is mainly statistical and based ...
DuPont analysis (also known as the DuPont identity, DuPont equation, DuPont framework, DuPont model, DuPont method or DuPont system) is a tool used in financial analysis, where return on equity (ROE) is separated into its component parts.
Valuation is a subjective exercise, and in fact, the process of valuation itself can also affect the value of the asset in question. Valuations may be needed for various reasons such as investment analysis , capital budgeting , merger and acquisition transactions, financial reporting , taxable events to determine the proper tax liability.
Note that whereas equity options are more commonly valued using other pricing models such as lattice based models, for path dependent exotic derivatives – such as Asian options – simulation is the valuation method most commonly employed; see Monte Carlo methods for option pricing for discussion as to further – and more complex – option ...