Using multiple valuation methods simultaneously is often helpful and depends on the nature of the asset being valued, the investor’s decision-making process, or legal and regulatory requirements. Applying different methods, including those based on various approaches (market, income, cost), usually results in a range of values that reflect the desired estimate.
If the valuation was prepared for transactional purposes, negotiation arguments will arise, enabling the assessment of value from multiple, often extreme, perspectives.
Subjectively ranking valuation methods based on an unclear criterion for their relative importance, and deriving a single valuation result by calculating a weighted average of results obtained using different techniques, undermines the credibility of the valuation process and gives the impression of manipulation.
However, if a stochastic model and multiple valuation methods are used in the process and a substantive argument is provided to justify which method more likely approximates the value of the valuation object, it may be advisable to limit the resulting value range using statistical methods. For example, this can involve using percentile measures of the probability density distribution of the valuation result, citing the risk management policy or the valuation’s context. Alternatively, a single value from the interquartile range may be recommended.
