Which method uses existing company valuations to estimate a target's value?

The chosen method, Comparable Companies Analysis, involves evaluating a target company’s value based on the valuations of similar companies operating in the same industry. This approach leverages market data from comparable firms, looking at various financial metrics such as earnings, revenues, and market capitalization to derive multiples that reflect how these companies are valued in the marketplace.

By applying these valuation multiples derived from comparable companies to the target company’s financials, analysts can estimate the target's value in a way that reflects industry trends and market sentiments. This method is widely used because it provides a practical perspective on valuation based on real-time market conditions, facilitating a more accurate understanding of how the target company fits within its competitive landscape.

The other methods involve different valuation approaches that don't focus on existing market valuations of similar companies. Discounted Cash Flow Analysis is centered on future cash flows and their present value, while Asset-based Valuation looks at the net asset value of a company, disregarding market comparison. Market Value Adjustment is less commonly referenced in the context of traditional valuation methods and may not directly relate to the comparative analysis that this question necessitates.