Business valuation methods

Discounted cash flows method
Main article: Valuation using discounted cash flows
A method for determining the current value of a company using future cash flows adjusted for time value. The future cash flow set is made up of cash flows within the determined forecast period and a continuing value that represents a steady state cash flow stream after the forecast period, known as the Terminal Value.
Multiples method
Main article: Valuation using multiples
A method for determining the current value of a company by using a sample of ratios from comparable peer groups. The specific ratio to be used depends on the objective of the valuation. The valuation could be designed to estimate the value of the operation of the business or the value of the equity of the business. When calculating the value of the operation the most commonly used ratio is the EBITDA multiple, which is the ratio of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) to the Enterprise Value (Equity Value plus Debt Value). When valuing the equity of a company, the most widely used multiple is the Price Earnings Ratio (PER) of stocks in a similar industry, which is the ratio of Stock price to Earnings per Share of any public company. Using the sum of multiple PER’s improves reliability but it can still be necessary to correct the PER for current market conditions.