Evaluating enterprise value by market method is a commonly used valuation method, which determines the value of the target enterprise according to the valuation of comparable enterprises in the market. Market method is mainly divided into two sub-methods: market multiple method and market transaction method. The following are the general steps to evaluate the enterprise value by using the market method:

Select a comparable company: First, select a comparable company similar to the target enterprise. These comparable companies should be in the same industry, with similar business characteristics and financial conditions. In order to get a more accurate valuation, we usually choose some comparable companies.

Determine multiple valuations: multiple valuations are a method to measure the value of an enterprise, which usually includes P/E ratio, P/B ratio, P/B ratio and so on. Select the appropriate valuation multiple and ensure that it is suitable for the selected comparable company.

Data collection: collect the financial data and valuation multiple data of the selected comparable companies. This includes financial statements, market transaction prices, market values, etc.

Calculate the valuation of the target enterprise: apply the selected valuation to the corresponding financial indicators of the target enterprise and calculate the valuation of the target enterprise. For example, the P/E ratio is selected as the valuation multiple, and the P/E ratio of the target enterprise is applied to its profit data to calculate the valuation of the target enterprise.

Adjustment of valuation: Considering the differences between the target company and comparable companies, adjustments may be needed. These adjustments may include factors such as enterprise scale, growth prospects, risks and financial structure.

Determine the final valuation: apply the valuation data and adjustment of the selected comparable companies to the target enterprise and determine the final valuation range. This may include a valuation range, not an exact figure.

Flexibility and sensitivity analysis: analyze different scenarios and consider different assumptions and changes to determine the sensitivity of the valuation range.

Calibration and verification: Finally, calibrate the valuation results to ensure that they are reasonable and in line with market conditions. This can include comparing with other valuation methods to verify the rationality of the valuation.

Market method is usually used for publicly traded enterprises or comparable companies, because the market price and valuation data of these companies are easier to obtain. It provides a relatively fast valuation method, but it needs to ensure that the selected comparable company is similar to the target company in order to obtain accurate valuation results. In valuation, multiple companies with multiple and comparable valuations are usually used to provide a more comprehensive valuation range.

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