Caveat Emptor: Business Valuation in a 21st-Century Economy—VentureCapital.org Reviewed by Momizat on . Past Performance is No Longer a Viable Valuation Tactic: Learn to Anticipate Future Prospects with Data Mining, Proprietary Benchmark Techniques, and a Close Lo Past Performance is No Longer a Viable Valuation Tactic: Learn to Anticipate Future Prospects with Data Mining, Proprietary Benchmark Techniques, and a Close Lo Rating: 0
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Caveat Emptor: Business Valuation in a 21st-Century Economy—VentureCapital.org

Past Performance is No Longer a Viable Valuation Tactic: Learn to Anticipate Future Prospects with Data Mining, Proprietary Benchmark Techniques, and a Close Look at Both Cash Flow and Capital Expenditures.   

Caleb Slabbert, writing at VentureCapital.org, which bills itself as a non-profit organization that has been “a premier resource for both entrepreneurs seeking funding and for investors who want to help promising young companies achieve their potential,”  asserted this week (3/26/13) that past performance of a company is no longer a viable valuation tactic.   What matters?   Newer techniques that many firms aren’t taking advantage of:  

Investment gurus are quick to point out that traditional business valuation tactics, which have historically relied on P/E ratios as their foundation, are becoming less relevant in an increasingly global corporate landscape, and that a balanced valuation methodology is one that incorporates both P/S and P/E ratios in addition to free cash flow analytics.

To be competitive, many business valuation services in the technology and industrial sectors use a combination of data mining and proprietary corporate benchmark techniques.  Successful corporate valuation requires a sophisticated understanding of cash flow and capital expenditures.  There’s a lot more to interpreting a balance sheet than simple math, and accurate valuation in the modern market has to be informed by a comprehensive understanding of revenue-based valuations.

High-growth sectors, like the biotech and electronics industries, are especially prone to misvaluation, and need to be looked at through a price/sales lens.  Corporations which have failed to produce a profit in the last year are not, after all, necessarily a bad investment, and companies in the high-growth sector may lose money for several quarters before they’re widely acknowledged as value companies.

Read the whole piece here

valuation

Focus Valuations on Likely Future Performance.  Here’s How. 

The National Association of Certified Valuators and Analysts (NACVA) supports the users of business and intangible asset valuation services and financial forensic services, including damages determinations of all kinds and fraud detection and prevention, by training and certifying financial professionals in these disciplines.

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