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Big4WallStreet Finance Blog — valuation

Valuation Pitfalls

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The difficulty of a valuation does not focus on how to find and apply any of the chosen methods, but rather on the ability to predict the future. In practice what is valued is the business model, the company strategy, the attraction of its products, its prospects and its risks.

Below we outline a series of pitfalls common among analysts and investors related to the valuation of a company.

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Valuation Methods: The Valuation Process

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The Valuation Process Definitions of value Several value definitions serve as the foundation for the variety of valuation models available to the comparison of equity valuation methods, such as intrinsic value, going-concern value, liquidation value, and fair value. Intrinsic Value The intrinsic value of any asset is the value of the asset given a hypothetically complete understanding of the asset’s investment characteristics. The intrinsic value suggests that an asset’s market price is the best available estimate of its intrinsic value. Going-Concern Value and Liquidation Value In estimating value, a going- concern assumption is the assumption that the company will continue...

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