Definition of Valuation Analysis

Valuation analysis is the process of comparing the values of two different assets or businesses. It tells the worth of an asset or a business.

Explanation of Valuation Analysis

The core question that governs any valuation analysis has to do with the present worth of the asset. This serves as the starting place for deciding if the investment is viable.

Many types of valuation methods are used, involving several sets of metrics. For equities, the most common valuation metric to use is the Price Earnings ratio, although other valuation metrics include: Price to Book Value, Price to Sales, Enterprise Value to EBIDTA, Economic Value Added and Discounted Cash Flow.