Highest Valuation Method valuation, company, someone, higher, method

jim8z3

Does someone know why the comparables method gives a higher valuation for a company than DCF?

Houjichasan

In theory, all absolute valuation methods will produce the same answer.  Comparables will give a higher value if the companies you are comparing to are “hot” or demand a higher price.  If they are depressed, then will give a lower price.

comp_sci_kid

Generally speaking, which method tends to give higher value? Is it comparables again?

cfalevel2011

Let me get this straight… you’re asking a bunch of strangers, who don’t know what you’re valuing or what your inputs are, why your multiples approach gives you a higher value than a DCF. Ok. With that in mind, the answer is C. Next!

justin88

Thanks for the replies guys, I am using previous transactions. I guess the answer lies to higher premium being paid?

Analyze_This

There could be a lot of reasons:
1.  Poor choice of public companies
2.  Poor choice of multiples
3. Overly conservative discount rate
4. Irrational exuberance in the market
How big a difference are you talking about?  Are you using forward multiples, or just historic multiples?

Roflnadal

Because the valuator is making an error in his DCF modeling.

bbtomato

Everything is overvalued at the same time, maybe?