Valuation of shares is a process by which an analyst determines the value of a particular stock. Many different methods can be used to valuation shares, but the three most common are the income approach, asset-based approach, and market approach.
The income approach valuation of shares focuses on the future cash flows expected to be generated by the company. The analyst will forecast the future cash flows and then discount them back to the present value.
The asset-based approach to valuation of shares focuses on the company’s balance sheet. The analyst will look at the assets on the balance sheet and try to determine what they are worth.
The market approach valuation of shares looks at how the market values similar companies. The analyst will look at comparable companies and determine what the valuation of shares should be.
Each of these methods has its strengths a
