Is it possible for a company that does not generate profits to have a high market value? And can a company that makes a profit be worth nothing? When we talk about a financial modeling process , the answer is yes to both questions.
This is because, in order to perform a company analysis, what counts is the expectation of what will happen to the business over time. Taking the case of Souza Cruz, the leader in the national cigarette market, its market value is probably not high, since anti-smoking campaigns are increasingly in evidence and the health generation abhors the consumption of its product.
This analysis shows us that determining the value of a uganda whatsapp data company is directly linked to its perception in the market. In this regard, carrying out a valuation – the process that estimates how much a company is worth – is extremely important.
How to do a company value analysis ?
One of the most widely used methods for performing valuation is Discounted Cash Flow (DCF ) . In practice, this methodology best reflects a company’s economic potential.
To this end, it is important to know that the value of an organization is basically made up of its capacity to generate future free cash flow, year after year.
Therefore, the price of assets, brands, patents, history, brand credibility, etc. only have effective value to the extent that they can be converted into future profits.
This is what DCF seeks to design and assess through three important steps:
Estimate of the company's cash flow for the next periods;
Definition of the discount rate, based on the company's risk according to other investments such as the stock market and savings, for example;
Bringing the results to present value and adding them together.
Another methodology that is used to complement this analysis method is the market benchmark . When a person wants to change cars and starts researching the best opportunities, they start following the advertisements published in newspapers and on the internet and compile the data in their head. In other words, they are benchmarking this market.
In the process of analyzing a company's value, this must be done every day. Regardless of the methodology used to perform the financial analysis , it must have consistent data.
Imagine, for example, that you need to compare the market value of a company that is a leader in the sector and holds 45% of the market share with another that is in third place and has a 10% market share. What variables should you look at and analyze to reach a conclusion? All of this encompasses the valuation analysis and should be considered in the analysis process.
Value perception
Within this scenario, there is the value perception factor. What does this mean? Let's imagine that the market priced Petrobras shares at R$10. This means that the company is expected to generate future cash flow equivalent to R$10 per share. In other words, the market had this expectation at the time it analyzed the data.
Therefore, it is essential that finance professionals know what is currently happening in their sector and in their company. After all, past performance is no guarantee of future performance.
Looking back is important to have a direction, but what matters in the financial viability project is the future. Even more so in an emerging country, where scenarios change rapidly.
A typical case of someone who knows how to analyze the market and calculate the promising value for his company is that of Facebook founder Mark Zuckerberg.
In 2006, he turned down a $750 million offer to buy his company. A few years later, he received a new $1 billion offer from Yahoo, which he also turned down. Some time later, in the world's largest technology IPO, Facebook was valued at $104 billion and is now worth more than $200 billion.
Zuckerberg's decision a few years ago was certainly not based on luck or guesswork, but rather on the great potential of his knowledge of his market and his company's data. His valuation analysis was completely consistent.
Without applying consistency in the analysis of a company's value, the professional will make mistakes in the evaluation process and the result will fall short of expectations.
To improve knowledge about company value analysis, Saint Paul – Escola de Negócios, offers the course Valuation: Company Assessment, Mergers, Acquisitions and Shares.