How the Valuation of a company is done?

Question

Various parameters on which the valuation of the company is done?

Answer 1

I believe its Evaluation.
Im sure they look at financial history, stock prices, stock history and managment history to name a few.

Answer 2

You did not specify whether it is for investing in or for employment. Nevertheless, I will take it that yopu meant evaluation for business investment.
There are several factors which determine whether a company is good or otherwise.
1. I would rate the age of a company as the foremost parameter. Longer the age better the company has managed through testing times and surviced / thrived.
2. Next is whether the company has grown assetwise over time. Is the market capitalization overvalued or is reasonable; is it paying dividend consistently to the investors; how does the company stand vis-a-vis its competitors are other few things.
3. If the company is good enough it reflects in the bourses too. The average traded volume, consistantly quarter after quarter will be consistent, which transends to you as ease of liquidation.
4. Look at the basic ratios like Price:Earning(PE) and Earning per Share (EPS) etc. Too big a figure for the former may be just the signal for a huge discounting in the near future.
5. Finally, if you want to value a company for 'take over', you have to go by an altogether different scale of evaluation. Many paramenters change proporationately.

Answer 3

Its a huge topic, a subject of specialisation. In brief, there are several methods for valuation of a company

1. Cash Flow method - future earnings of a company are discounted to get a present value of the company.
2. Book value method - Value of a company as per its books.
3. Adjusted Book value method - Here assets and liabilities are are taken at market values as against the pure book values.
4. Comparable company method - Compares the value of the company with that of another company whose market value is known.
5. Comparable transaction method - Value of the company as indicated by a recent trasaction (acquisition, merger etc).

There can be variations within each method. You may read the books on Valuation by 1) Damodaran and by 2) Mckinsey n Company.

Answer 4

It is Valuation.

It all depends on the business and market.
They look at things like location of the business, the employees, the management (including their previous success or failures), annual revenue, profitability, years with a profit, market conditions, market growth, competition.....just to name a few.