Technical - Most Popular Valuation Techniques
- 01:22
Investment Banking Superday interview technical question - Which is the Most Popular Valuation Technique?
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Okay.
And let's, uh, clarify a couple of things.
So out of the three that you just mentioned, which are definitely, um, the big valuation s let's say, uh, which do you think is the most popular? Yeah, well, it really depends on both the industry and it depends on the investor.
So, like I said, someone like Warren Buffet who, you know, maybe, maybe a better, a good example is Terry Smith, who, obviously he runs Fundsmith.
He would say the DCF 'cause he very much likes, um, value, value style of investing where you're thinking about predictable cash flows in the future.
So they like predicting me in that kind of sense.
But this, like I said, this is, is often very, uh, dependent on some of your assumptions.
So it may not always be accurate, but I would say especially to people who, who go into finance, the DCF is often a very good place to start.
You can also look at other, other ways like the reverse DCF, which essentially takes you as a sort of self explanatory from the share price back up to the earnings.
But the DCF is, is a good way to start.
But trading and transaction com comparables may be better for people, maybe for investment banks who are looking at similar companies who don't wanna use A DCF.
But you wouldn't, you may not use a DCF with a bank.
You may, so you may use transaction comparables instead.
It really depends on the industry.