Connecting strategy to valuation

According to Johnstone (2016), the strategic valuation is developed for both up-to-date and historical budgetary information. Mainly, it includes management and statutory accounts. Here, the proper utilization of some techniques of valuation helps in arriving at the accurate, current valuation (Mchawrab 2016). In general, the primary aim of the equity valuation is for the estimation of the value for security or a firm (Kornberger 2017). In this case, over and undervaluation must be taken into consideration in light of the equity valuation.

Over Value

The current price of an overvalued stock is not justified by the P/ E (price/ earnings) ratio or the outlook of remuneration (Kornberger 2017). For this reason, there is an expectation that it will drop in price. Again, an emotional buying spurt may bring about overvaluation. As a result, it inflates the market price of the stock (Meszek 2013). Additionally, a deterioration in the financial strength of a company may also contribute to the overvaluation. At this point, the potential investors will not be willing to pay for the stock (Mchawrab 2016). Such a scenario negatively affects the firm since it will be losing out to the competitors.

Under Value

Often, under value is offered as one of the vital factors to be taken into consideration regarding the private equity transactions (Meszek 2013). In other words, undervaluation in the market acts as a factor that is dominant in the private equity takeovers (Johnstone 2016). However, the study is robust to the prevailing conditions of the market, alternative valuation measures, and the subperiods and money flow.

The way Strategy is used to beat Competition in the Industry and Increase the Company’s Value. In the industry, to beat the competition requires the collective effort of everyone. Kornberger (2017) notes that some of the ways in which strategy is used for beating such competition in the industry involve defining the brand, creating a customer database, and choosing a competitive advantage. Moreover, communication with the customers, and exciting the customers also helps to beat the competition in the industry (Johnstone 2016). In fact, all the activities aim at increasing the value of the company. For example, no one business can be appealing to everybody (Mchawrab 2016). Here, the best response is to consistently communicate the USP (unique selling positions) after defining the brand. Overall, the value of the company will be increasing as it will still be receiving more and more customers despite the stiff competition.

Conclusion

In summary, the process of strategic valuation must always ensure the identification and development of financial and non-financial information. These activities are helpful for the preparation of the business for any transaction of the future. All in all, the proper use of the equity models of valuation helps the firm to best their competitors.

Bibliographies

Johnstone, D. (2016). Advances in Equity Valuation: Research on Accounting Valuation. Abacus, 52(1), pp.1-4.

Kornberger, M. (2017). The Values of Strategy: Valuation Practices, Rivalry, and Strategic Agency. Organization Studies, p.017084061668536.

Mchawrab, S. (2016). M&A in the high-tech industry: value and valuation. Strategic Direction, 32(6), pp.12-14.

Meszek, W. (2013). Property valuation under uncertainty. Simulation vs. strategic model. International Journal of Strategic Property Management, 17(1), pp.79-92.