- Valuation Basics
- Discounted Cash Flows
- Going Concern concept
- Dividend Discount Model (DDM)
- Gordon Growth Model
- Gordon Growth Model Formula
- Discounted Cash Flow Analysis (DCF)
- Free Cash Flow Formula (FCF)
- Free Cash Flow to Firm (FCFF)
- Free Cash Flow to Equity (FCFE)
- Terminal Value
- Cost of Equity
- Cost of Equity Formula
- Risk-Free Rate
- CAPM Beta
- Calculate Beta Coefficient
- Market Risk Premium
- Risk Premium formula
- Weighted Average Cost of Capital (WACC)
- Cost of Capital Formula
- WACC Formula
- Security Market Line (SML)
- Systematic Risk vs Unsystematic risk
- Free Cash Flow (FCF)
- Free Cash Flow Yield (FCFY)
- Mistakes in DCF
- Treasury Stock Method
- CAPM Formula
- Cash Flow vs Free Cash Flow
- Business Risk vs Financial risk
- Business Risk
- Financial Risk
- Valuation Multiples
- Equity Value vs Enterprise Value
- Trading Multiples
- Comparable Company Analysis
- Transaction Multiples
- (Price Earning Ratio (P/E)
- PE Ratio formula
- Price to Cash Flow (P/CF)
- Price to Book Value Ratio (P/B)
- Price To Book Value formula
- Price Earning Growth Ratio (PEG)
- Trailing PE vs Forward PE
- Forward PE
- EV to EBITDA Multiple
- EV to EBIT Ratio
- EV to Sales Ratio
- EV to Assets
- Other Valuation Tools
- Valuation Interview Prep
Valuation analyst – What does he do?
In simple terms, a valuation analyst analyses an asset, a business, equity, real estate, commodity, fixed income security etc. and then estimates an approximate value of the same. A valuation analyst will take multiple methods to estimate the valuation since one approach wouldn’t work for every type of asset.
Let us look at one of the job profiles of Valuation Analyst. Key responsibilities of valuation analysts are listed in the below snapshot.
As we note from about, valuation analyst works on variety of assignments including financial analysis of companies, Discounted Cash Flow Analysis , Financial Modeling of companies, reviewing debt and equity securities, valuation of Intellectual property, business valuations, intangible asset valuations, option valuations across multiple industries.
However, while performing the valuation analysis, she would chunk down the inherent aspects of each asset and look at all the factors.
For example, if an analyst will look at the valuation of a business, she may use discounted cash flow method. Under that method, she will look at all the future cash flows the business can generate and then will turn them into present values to see the actual value of the business as of now.
Valuation analysts look at various factors before they ever value a company or an asset. These factors are –
- Profit Margins
- Capital Expenditures
- Options for financing
- Tax Rates
- The rate of Discount that would be used to find out the present value etc.
Let’s now look at the qualifications you need to become a valuation analyst.
Required skills of a Valuation Analyst
Let us look the required qualification of a valuation analyst.
- The basic qualification of becoming a valuation analyst is to pursue your graduation in finance or accounting. Even if this is the basic qualification required to pursue a career in valuation analysis, you need to be pretty advanced in financial modeling and valuation. MBA is also an added advantage.
- A good idea is to go for CFA while you join a company as a Junior Associate. Since you can pursue CFA while doing a job (actually to pass CFA, you need to have 4 years of full-time employment in the financial field).
- Having a CFA degree along with an experience of 4-5 years would turn out to be a great advantage for you as a valuation analyst.
- Excellent skills with applications like Microsoft Word and MS Excel
Valuation analyst career graph
If you want to be at the top level in your valuation analyst career, here is a snapshot –
- After completing your bachelor degree in accounting or finance, you will join a company as a junior associate of valuation. Before joining a company, it’s a great idea to do an internship with a reputed company. It will increase your chances of full-time employment with the same or similar company.
- Then after few years of learning and gaining the expertise, you will become a senior associate.
- At this stage, you should start pursuing your CFA. While you finish up your CFA Level 1, CFA Level 2, and CFA Level 3, you would be promoted to the position of Manager in Valuation or in Consulting.
- At this stage, you would have two options – the first option is to continue in the same profile or to join a public accounting firm as a partner or similar position. If you choose the latter, this is how you would exit your valuation analyst career profile.
- If you decide to continue in the same valuation analyst career profile, after few years as a manager, you would become the vice president of the consulting firm. From here most of the candidates change their profile. You would have three options at this juncture. You can join the corporate sector as CEO or CFO. You would have the option to join a company in the financial sector and get a managing director position or sort. The last option is you can choose to start your own venture and become an entrepreneur.
Valuation Analyst Salary
Many candidates choose valuation analyst career profile because of a great career growth and a decent compensation.
- As a junior or senior associate, you can expect to earn around $60,000 to $90,000 per annum (the amount is inclusive of the bonus).
- As a manager, you would earn around $90,000 to $150,000 per annum (the amount is inclusive of the bonus).
- As a vice president, your earning (including bonus) would be around $150,000 to $300,000 per annum.
- If you choose to continue on your path, you would become a partner of the company and you would around $300,000 to $1 million per annum (including bonus).
Valuation analyst career profile is 80% science and 20% art. You would be involved with a lot of financial modeling, valuation techniques etc. At the same time, you need to make certain assumptions as well to reach a conclusion.
That’s why you need to constantly learn, understand the market, update yourself about what’s going on, and apply what you learn along. Overall, valuation analyst career profile is a great profile and will be suitable for those who love financial modeling.
Video on Valuation Analyst
This has been a guide to Valuation Analyst Career Profile, what are the skills required to become a valuation analyst. We also discuss valuation analyst career graph and salary expectations. You may learn more about Corporare Finance from the below articles –