How to Value a Company: The Three Main Approaches

There's no single 'correct' price tag for a company — that's exactly why analysts use three different methods and see where they land. Comparable companies (comps) checks what similar public companies trade at. Discounted cash flow (DCF) projects a company's own future cash and converts it to today's dollars. Precedent transactions looks at what similar companies actually sold for in real acquisitions.

No single method is treated as gospel — a DCF is only as good as its growth and discount-rate assumptions, comps can be distorted if the whole sector is over- or under-valued, and precedent deals include buyer-specific premiums that may not apply generally.