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Sum of the parts analysis (SOTP), or break-up analysis, is a method of valuation of a multi-divisional company, holding company, or a conglomerate. The essence of the method is to determine what divisions would be worth if the conglomerate is broken up and spun off or acquired by another company; [ 1 ] see Conglomerate discount .
Market Share is the breakup of market size in percentage terms, to help identify the top players, the middle and the "minnows" of the marketplace, based on the volume of business conducted; Market Segmentation Some of the factors that determine the market are price, quality, speed of service, ease of maintenance, and points of distribution.
Recent examples of Deconglomeration in the US include ITT, Motorola, Fortune Brands, Marathon Oil, Genworth, and Sara Lee Corporation. The results have generally been quite positive. For example, ITT’s shares went up by some 11% on the breakup announcement, creating roughly $1B in value. [5]
Stock valuation is the method of calculating theoretical values of companies and their stocks.The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit from price movement – stocks that are judged undervalued (with respect to their theoretical value) are bought, while stocks that are judged overvalued are sold, in the ...
Using the residual income approach, the value of a company's stock can be calculated as the sum of its book value today (i.e. at time ) and the present value of its expected future residual income, discounted at the cost of equity, , resulting in the general formula:
The post-money valuation is equal to $8 times the number of shares existing after the transaction—in this case, 2,366,667 shares. This figure includes the original 1,000,000 shares, plus 1,000,000 shares from new investment, plus 166,667 shares from the loan conversion ($1,000,000 divided by 75% of the next investment round price of $8, or ...
A corporation can adjust its stock price by a stock split, substituting a quantity of shares at one price for a different number of shares at an adjusted price where the value of shares x price remains equivalent. (For example, 500 shares at $32 may become 1000 shares at $16.) Many major firms like to keep their price in the $25 to $75 price range.
One good example of decreasing asset value is a personal computer. An example of where book value does not mean much is the service and retail sectors. One modern model of calculating value is the discounted cash flow model (DCF), where the value of an asset is the sum of its future cash flows, discounted back to the present.