Which method applies a market-determined multiple to various financial metrics to value a target company?

The method that applies a market-determined multiple to various financial metrics to value a target company is Market Multiple Analysis. This approach involves comparing the target company’s financial metrics—such as earnings, revenue, or EBITDA—with those of similar companies in the market. By using multiples derived from comparable firms (which may be based on metrics like price-to-earnings or price-to-sales ratios), analysts can estimate a fair value for the target company.

This valuation technique is grounded in the principle of comparability, where the value is influenced by how similar businesses are being valued in the marketplace. It leverages real market data to derive a valuation, making it useful for investors looking to assess how a company stands relative to its peers.

While Discounted Cash Flow Analysis focuses on the intrinsic value based on projected cash flows, and Net Asset Value Calculation emphasizes the value of the company's assets minus liabilities, Market Multiple Analysis is distinct because it is driven by market perceptions and actual trading data, providing insights into how the market values similar companies. Comparative Company Analysis is a subset of Market Multiple Analysis often used interchangeably, but the main distinction is that Market Multiple Analysis encompasses a broader range of market-determined metrics.