What are the methods of enterprise value evaluation?

Enterprise value evaluation is a comprehensive evaluation of enterprises from the financial and commercial perspectives to determine the value level of enterprises. The following are some common enterprise value evaluation methods:

Market method: this method evaluates the value of the target enterprise by comparing the market transaction data of the target enterprise with that of similar enterprises. This includes comparing price-earnings ratio (P/E ratio), price-to-book ratio (P/B ratio) or sales-to-income ratio. By looking for listed companies or companies that have had similar transactions with the target company and comparing their valuation indicators, the value of the target company can be inferred.

Income method: the income method is to evaluate the value of an enterprise according to its expected future cash flow. Commonly used methods include DCF and profitability method. The discounted cash flow method calculates the value of an enterprise by discounting the expected future cash flow to the current value. Profitability method is to calculate the value of an enterprise according to its profitability and profitability. These methods need to reasonably predict and estimate future cash flows and profits.

Asset method: Asset method is to evaluate the value of an enterprise according to its assets and liabilities. Common methods are net assets method and replacement cost method. The net asset method calculates the net asset value of an enterprise, that is, the total net assets MINUS the total liabilities. The replacement cost method is to calculate the value of an enterprise according to the cost required for rebuilding or repurchasing assets. These methods are suitable for enterprises dominated by assets or enterprises with no obvious profitability.

In addition to these methods, we can also combine a variety of methods to evaluate, in order to obtain a more comprehensive and accurate enterprise value evaluation results. In the process of evaluation, it is necessary to comprehensively consider the financial situation, market position, growth potential, management team, risk factors, macroeconomic environment and other factors of the enterprise. At the same time, the assumptions, data quality and risk analysis in the evaluation process also need to be properly considered and adjusted to obtain more accurate value evaluation results.