Best book on Valuation

5 Common Business Valuation Methods

Two approaches are the foundation of valuation, discounted cash flow valuation and relative valuation . The first one is a bottom-up approach where the present value of an asset’s future cash flows is calculated, the second determines the value of an asset by comparing it to similar other assets.

Add up the value of your assets, subtract your liabilities , and you have the total value of your business.

The most common way to value a stock is to compute the company’s price-to-earnings (P/E) ratio . The P/E ratio equals the company’s stock price divided by its most recently reported earnings per share (EPS). A low P/E ratio implies that an investor buying the stock is receiving an attractive amount of value.