Valuation is used to fundamentally understand how much a company is worth. For example if you want to buy a house or a car you first need to know how much to pay for that. Similarly when you want to buy a companies shares you want to understand how much the company is worth. Its the same idea.
Jun 21 2013 11:01 AM
There are 3 popular valuation methods - DCF, Comparable Trading and Comparable Acquisitions. Usually all 3 are used to understand the rough valuation of a company.