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Fidelity

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Valuation Fundamentals
Table of Contents

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Table of Contents
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Introduction
– Concept of Fair Value
– Who uses Valuation?
Valuation & Wealth Maximization
Valuation Approaches
Valuation Methods
Is there a ‘Best’ method?

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Which method is best suited ?
– Public vs Private Company
– By Scenario
– By Sector
Valuation FAQs
– General
– DCF
– Comparables

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Equity Valuation Fundamentals
Introduction – Concept of Fair Value

www.finaticsonline.com

At Finatics, we define Equity Valuation as
“A process that involves determining „Fair Value‟ of a company‟s equity in order to assist buy/sell decisions for the purpose of Financial or Strategic Investment ”

So what is Fair Value of an investment? How should the worth of an
Investment be determined ?

…(Contd)

Put Simply, Fair Value is the price at which, one will get the desired rate of return when the investment is sold to a willing & able buyer.
The worth of an investment is determined by whether it is meant for long term use to generate returns
(i.e. Strategic Investment) or for resale when the „right price‟ or „fair value‟ is achieved (Financial
Investment). The purpose of Valuation is to determine a fair value range of an investment (or capital asset) using one or more of several available techniques As discussed, investment related demand will be driven by expected return resulting from demand of other similar opportunities available, potential to generate cash and implied risk.
When determining whether expected return can be achieved, one way is to estimate the cash generated from the „Asset‟ against what is invested after considering „Time Value of
Money‟ (a.k.a. Net Present Value)

… the other way is to find out what are other „similar‟ opportunities

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