Investors have detailed, quantitative valuation models they consult before making investment decisions. So why don’t corporate managers have a similarly quantitative, detailed understanding of how the market values their company, so they can make equally informed decisions to maximize shareholder value?
6 Factors That Determine Your Company’s Valuation
Investors have a quantitative understanding of how the market values a company. Management teams should too.
October 25, 2022
Summary.
Investors consult detailed, quantitative models before making decisions. Shouldn’t corporate managers have a similar understanding of how the market values their company, so they can make informed decisions to maximize shareholder value? An EY-Parthenon analysis of quarterly data from thousands of companies in hundreds of industries over a period of 20 years has identified six critical factors that account for most of the variability in market valuations. Management teams can use these to create a model that allows them to compare industries, companies across industries, and companies within the same industry. The model can also help leaders understand changes in how the market values any of these companies over time.
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New!
HBR Learning
Sharpening Your Business Acumen Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Sharpening Your Business Acumen. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Take your career to the next level by learning business and finance basics, and developing an enterprise mindset.