One of the most common questions we get from business owners and investors is: "which valuation method should be used for my company?" The honest answer is that the right method depends on the purpose of the valuation, the nature of the business, and the data available — not personal preference.
Discounted Cash Flow (DCF)
DCF values a business based on the present value of its projected future cash flows. It is the most theoretically sound method and is preferred for businesses with stable, forecastable cash flows — but it is highly sensitive to assumptions around growth rate and discount rate, so the workings must be transparent and defensible.
Comparable Company Analysis (CCA)
CCA benchmarks a company against listed peers using trading multiples such as EV/EBITDA or P/E. It works well when a reasonable set of comparable companies exists, and is often used to cross-check a DCF-derived value.
Net Asset Value (NAV)
NAV values a business based on the fair value of its underlying assets less liabilities. It is most relevant for asset-heavy businesses, holding companies, or situations where the business is not a going concern.
Choosing the Right Approach
In practice, regulators and courts typically expect a triangulated approach — using more than one method and explaining the weight given to each. As an IBBI Registered Valuer, our valuation reports are built to withstand exactly this level of scrutiny, whether for M&A, FEMA compliance, or banking transactions.