1, cash flow discount method
Discounted cash flow method is the most widely used model in enterprise value evaluation at present, and it is also the most important application model in income method. The basis of cash flow discount method is present value method. The present value method points out that the value of any asset of an enterprise is equal to the sum of all discounted cash flows expected to be obtained in the future. As a measurement model of the value of the invested enterprise in PE investment, the discounted cash flow method calculates the value of the invested enterprise by discounting and summing the free cash flows of the invested enterprise in each period.
2. relative valuation method
Relative valuation method is also called market law. Relative valuation method is to evaluate the value of the invested enterprise by comparing and analyzing the invested enterprise with similar enterprises or similar enterprises in the industry under the premise of assuming the market is effective. The basic methods are: first, according to the industry and scale of the invested enterprise, find a key variable (such as net profit) that affects the value of the enterprise; Secondly, determine a group of comparable similar enterprises or similar enterprises, and calculate the average value of the ratio between the market price of comparable enterprises and key variables (such as comparable average price-earnings ratio); Finally, the key variables (such as net profit) of the invested enterprise are multiplied by the comparable average (P/E ratio) as the evaluation value of the invested enterprise.
Two key points of relative valuation method: the choice of ratio and the choice of similar companies. Among them, similar companies are generally selected from enterprises with similar market environment, business model and company size in the same industry. The choice of ratio should also reflect the most critical factors affecting the enterprise value, and must be observable and available data. The ratios that can be selected are generally P/E ratio and P/B ratio.
3. Cost method
Cost method is also called asset-based method. Cost method refers to the method of adding all assets and liabilities of an enterprise on the basis of reasonable evaluation of the values of various assets and liabilities of the enterprise, so as to determine the value of the invested enterprise. The premise of the cost method is that the enterprise is composed of a series of independent single assets, and the value of the company depends on the sum of the evaluation values of the elements that make up the company. The cost method is to examine the value of the enterprise from the perspective of the reconstruction of all asset elements that constitute the whole invested enterprise, and finally summarize the valuation of the invested enterprise.
The theoretical basis of cost method is the embodiment of "substitution principle". In other words, when any rational economic man invests in assets, the price he is willing to pay will not be higher than the cost of obtaining the corresponding functional assets substitutes. The enterprise value obtained through the cost method is actually the adjusted value of the book value of the enterprise. Cost method originated from the traditional evaluation of physical assets, such as buildings and machinery and equipment, and focused on the value of a single asset. The cost method considers the cost of the enterprise, and seldom considers the income of the enterprise, so the cost method determines its current market value by adjusting the assets and liabilities of the balance sheet.
4. Real option method
The real option method is an option with the real object as the underlying asset. Real option method is to evaluate the value of assets with option characteristics by using option pricing model.
The most famous option pricing model is BS(Black and Scholes) model, which calculates the value of European options based on non-dividend stocks. Under a series of strict assumptions, through rigorous mathematical deduction and demonstration, the option pricing method is put forward. Simply put, for a call European option that meets the hypothetical conditions, the value of the option can be calculated by BS model by determining five variables: exercise price, maturity date, volatility, current price and risk-free interest rate.
Under certain assumptions, real options can also be evaluated and calculated by BS model. Therefore, for a physical asset with option characteristics, BS model or other option valuation models can be used to evaluate its value. If a PE investment can be converted or confirmed as a real option, then this investment can naturally be valued through the option pricing model.
The real option method is especially suitable for the valuation of high-tech enterprises, which have the characteristics of high investment, high risk and high income. The initial profit is often negative, and the cash flow is also negative, so it is difficult to find a suitable comparable company. Therefore, it is difficult to use cash flow discount method or relative valuation method for valuation. At this time, it is a better choice to use the real option method for valuation. In addition, for some enterprises in financial distress or on the verge of bankruptcy, it is difficult to evaluate by conventional methods, so we can try to evaluate them by real option method at this time.