How to value companies

[i4value]

The heart of value investing is comparing price with intrinsic value. Valuation is thus key. This is of course part art and part science and there are many methods to value companies. They can be summarized into

• relative valuation eg using PE or PBV
  
• asset-based valuation eg using the NTA or RNAV
  
• earnings-based eg using the DCF method
  

I think the house valuation analogy as illustrated below gives a good picture.