Different Types Of Valuation Methods

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Within the financial sector, there are many different types of valuation methods in which their purpose is to receive the share price of a company. Throughout this paper, I will discuss the various methods and the factors that contribute to the outcomes of each one. The context of this paper will be discussed in the manners of both the positive and negative aspects of each method. With each method, I will also explain the factors that significantly influence the price of each method used. Currently, Cenovus is trading on the Toronto Stock Exchange at a value of $17.83. One of the key aspects that I will acknowledge is that they currently have a long-term growth value of -108% and their target price is $18.55. Other factors can be…show more content…
This is one of the most significant downfalls of this method, because you can greatly misprice the value of the firm without considering the cash flows as well as other variables. Another common valuation method that one may use is the EV/EBITDA ratio method. This specific method takes into consideration the value of EBITDA as well as the value of net debt (market value of debt). Another important consideration that investors must be aware of is the type of depreciation method that Cenovus uses. Since Cenovus is a large asset company, this is a vital aspect to consider when using the book value method. If Cenovus depreciates their assets at a faster pace, this will allow investors to part take in a valuable investment and would cause for a positive pick for their portfolio. However, if the company depreciates their asset in a slower manner, this could create a higher book price than what the stock is currently trading at. This may misrepresent the value of the firm to the investor. Investors should be cautious when considering this type of method for valuing companies. Therefore, investors should do thorough research in what type of depreciation method Cenovus uses. The methods include a straight line depreciation or a double declining method. Both have a significant impact on the share price of the firm when using the book value approach. One common method within the industry
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