Business valuation methods include three basic groups: income methods, and methods for comparison of businesses.

Business valuation comparative method, as the name suggests, is based on a comparison of data. These data are mostly financial results or other parameters achieved by the valued company's financial results or other parameters like company. The most common reference point is the comparison of the companies listed on the stock exchange, as in the comparative method is important to know the value of the comparator entity.

This method is basically straightforward (or at least not as complicated as such. DCF). In addition, the valuation of our company is based on real market valuation of the enterprise to which we compare our results.

Business valuation comparative method is used primarily by stock analysts and investment advisors.

And like any simple way - it is exposed to the risk of having a source of low comparability of the financial results of individual companies. This often comes to the lack of knowledge about the specific factors that affect the performance and valuation of comparable companies.

However, the comparative method is willingly used during the initial valuation of the company - eg. in the early phases of the project, when we have very limited ability to obtain sufficient knowledge and data sources. On the other hand - comparative methods are often used in transactional processes already in the stage of negotiation.

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