How would you value a company?

There are three common valuation methods used in IB:

1) The multiples approach (also called “comps”), in which you multiply the earnings of a company by the P/E ratio of the industry in which it competes (and other ratios).

2) Transactions approach (also called “precedents”), where you compare the company to other companies that have recently sold/been acquired in that industry.

3) The Discounted Cash Flow approach, in which you discount the values of future cash flows back to the present.