Whether you’re raising capital, evaluating an acquisition, planning an exit, or simply assessing your company’s financial health, one question always takes center stage: What is my company worth?
Company valuation is both an art and a science—a blend of financial modeling, market insights, and strategic judgment. While the goal is simple, the methods vary widely depending on industry, stage, business model, and purpose.

Below are the seven most trusted valuation frameworks used by financial analysts, investment bankers, VCs, and M&A teams worldwide. Understanding these can help you negotiate better, avoid undervaluation, and make data-backed decisions about your company’s future.

1. Discounted Cash Flow (DCF) Valuation

DCF calculates the present value of future cash flows, adjusted for the time value of money.
It answers the central question: What is this business worth today based on the cash it will generate tomorrow?

Why it works:

• Values a company based on its earning potential
• Widely used in investment banking and corporate finance

Where it struggles:

• Accuracy depends heavily on forecasts and discount rate
• Sensitive to assumptions—small changes can drastically alter valuation

DCF is ideal for stable businesses with predictable cash flows, utilities, SaaS businesses with retention visibility, and mature companies.

2. Comparable Company Analysis (CCA)

CCA places your company side-by-side with publicly traded peers. It uses valuation multiples such as P/E, EV/EBITDA, P/S, P/B, comparing how similar companies are priced by the market.

Why it’s popular:

• Fast, practical, and based on real market data
• Works well for early-stage businesses and industries with many listed peers

Limitations:

• Ignores company-specific nuances
• Market conditions can skew values

CCA is often the starting point in an M&A discussion or equity fundraising because investors love market-anchored valuations.

3. Precedent Transactions Analysis

This method looks at similar companies that were acquired in the past and uses their transaction multiples as benchmarks.

Why it matters:

• Reflects real deal behavior and buyer sentiment
• Captures acquisition premiums (strategic and control value)

Drawbacks:

• Quality of comparables may vary
• Dependent on deal timing and market cycles

Precedent transactions are extremely useful during M&A, especially when arguing for a higher valuation based on strategic buyer activity.

4. Asset-Based Valuation

Here, valuation equals assets minus liabilities, based on fair market value.
It focuses on what the company owns rather than what it earns.

Where it shines:

• Works for asset-heavy businesses—manufacturing, real estate, logistics
• Simple and grounded in tangible value

Where it fails:

• Ignores intangible assets
• Not suitable for IP- or brand-driven industries

Startup founders should avoid relying on this unless their business is genuinely asset-centric.

5. Earnings Multiples (P/E, EV/EBITDA)

This method values a business using its profitability. For example:

• P/E Ratio = Market Price per Share ÷ Earnings per Share
• EV/EBITDA Ratio = Enterprise Value ÷ EBITDA

Strengths:

• Reflects realistic investor expectations
• Useful for profitable, growing companies

Weaknesses:

• Not suitable for early-stage or loss-making companies
• Vulnerable to cyclical fluctuations

This method is the backbone of private equity valuation, especially for companies with strong, stable earnings.

6. Liquidation Valuation

This valuation assumes the company shuts down today and assets are sold to pay off liabilities.
It essentially answers: What can be recovered if everything is liquidated?

Strengths:

• Useful for distressed businesses
• Provides a minimum floor value

Limitations:

• Significantly undervalues going-concern businesses
• Not suitable for growth-stage companies

Liquidation value becomes important during insolvency, restructuring, or when evaluating downside risk.

7. Weighted Average Cost of Capital (WACC)

WACC is not a valuation method on its own but a core calculation used inside DCF.
It represents the average rate of return investors expect from a company’s equity and debt.

A correct WACC is crucial because:

• It impacts how future cash flows are discounted
• It reflects risk, capital structure, and return expectations

A miscalculated WACC can distort a valuation by millions, making this one of the most sensitive parts of financial modeling.

Which Valuation Method Should You Use?

There is no “one-size-fits-all” approach. Most investors and analysts use a blend of two or more methods, depending on the situation:

• Startups: CCA, revenue multiples
• Growing/Profitable companies: Earnings multiples, DCF
• M&A negotiations: Precedent transactions, CCA
• Distressed assets: Liquidation value, asset-based valuation
• Industry giants: DCF + market multiples

The smartest approach is triangulating across methods to build a valuation range rather than a single number.

Understanding valuation isn’t just for finance professionals. Founders, investors, CFOs, and business owners benefit immensely from knowing how and why a company is valued the way it is.
These seven frameworks provide a solid foundation to negotiate confidently, make strategic decisions, and drive long-term value creation. Get in touch with us.