The cover shows a hypothetical factory and documents, not an asset valuation report or real transaction.
The hypothetical factory's DCF gives equity value of about THB 27.11 million. Suppose a multiple gives THB 24 million while adjusted net asset value is THB 14.70 million. Which figure is wrong? Before averaging them, I would check whether the three methods answer the same question and what each reveals that the others may miss.
Using several methods helps when we can explain why their answers differ. DCF examines future cash. A valuation multiple relates comparable prices to a financial measure. An asset approach assesses assets and related obligations. None lets us skip questions about revenue quality, work still owed, or the data behind a comparison.
Every figure in this article concerns a hypothetical parts factory at the end of base year 0, in THB millions unless stated otherwise. The 6 to 8 times and 10 to 14 times multiples illustrate calculations only. They are not observed transactions, industry averages, or recommended price ranges for a reader's company.
Before using a multiple, know whose value and earnings it pairs
EV/EBITDA pairs enterprise value with earnings before interest, taxes, depreciation, and amortization. It calculates EV first, then bridges to equity value. P/E pairs share price or equity value with earnings attributable to shareholders, after interest and tax, not EBIT.
This example uses adjusted trailing earnings for the base year. It does not multiply next year's EBITDA by a multiple calculated from another company's historical earnings. Assume no noncontrolling interests, preferred shares, or other claims, and one million common shares with no potential dilution.
Before using real comparables, align the price date, currency, earnings period, adjustments, accounting policies, and scope of debt or leases. Sharing an industry label is not enough if one company grows faster, needs more investment, or depends more on one customer.
EV/EBITDA
Start with enterprise value, then allocate claims between lenders and shareholders
P/E
Pair equity value with shareholders' earnings; the result is equity value directly
EV/EBITDA gives enterprise value before separating shareholders' claims
Adjusted EBIT of THB 3 million plus THB 1 million of depreciation and amortization gives THB 4 million of EBITDA. The adjustments still depend on the conditions discussed in the first article: restructuring paid in full, an impairment whose economic problem has not disappeared, and a nonrecurring gain on an asset sale.
| EV/EBITDA | EV | Add excess cash | Less interest-bearing debt | Equity value | THB per share |
|---|---|---|---|---|---|
| 6 times | 24.00 | 2.00 | 6.00 | 20.00 | 20.00 |
| 7 times | 28.00 | 2.00 | 6.00 | 24.00 | 24.00 |
| 8 times | 32.00 | 2.00 | 6.00 | 28.00 | 28.00 |
Total cash is THB 2.50 million, but THB 0.50 million is needed for operations, so only THB 2 million of excess cash is added. The THB 6 million of debt is assumed to be its market value. There are no lease liabilities or other claims requiring adjustment in this example. Operating payables are not deducted again without reason; the business base used for comparison already needs to support the related working capital.
EBITDA helps compare some aspects of performance but does not show cash spent on machinery or added inventory. A factory with heavier replacement needs than its comparables may not deserve the same multiple even with equal EBITDA. When EBITDA is negative or close to zero, the ratio may not be useful for a decision.
P/E gives equity value directly
Hypothetical net income is (THB 3.00 million EBIT − THB 0.30 million adjusted interest) × (1 − 20%) = THB 2.16 million. Assume no other nonoperating income or obligation and a 20% tax rate applicable to this base. This is not a real corporate tax calculation.
| P/E | Calculation | Equity value | THB per share |
|---|---|---|---|
| 10 times | 2.16 × 10 | 21.60 | 21.60 |
| 12 times | 2.16 × 12 | 25.92 | 25.92 |
| 14 times | 2.16 × 14 | 30.24 | 30.24 |
Do not add the THB 2 million of cash and deduct THB 6 million of debt again as in the EV/EBITDA table; P/E already gives equity value. Debt structure affects interest and the net income being compared. Different debt levels therefore call for assessing whether the multiple fits, not repeating the EV bridge.
Revenue multiples need particular care for systems integration and software resale. A principal and an agent may report revenue on different bases, while pass-through license or product revenue can have a very different margin from the team's service fees. Two companies with THB 100 million of revenue do not necessarily deserve the same value.
Adjusted net asset value requires more than reading book equity
The hypothetical statements have THB 24 million of recorded assets and THB 11 million of liabilities, leaving THB 13 million of book equity. Adjusted net asset value (adjusted NAV) examines assets and liabilities on a defined basis, including collectibility, inventory saleability, property use or sale, and related costs and taxes. It does not merely relabel THB 13 million as the company's price.
| Item | Book value | Illustrative adjusted value | What needs checking |
|---|---|---|---|
| Cash | 2.50 | 2.50 | Includes both operating and excess cash in the asset approach |
| Receivables | 4.00 | 3.80 | Assumed outcome of a collectibility review |
| Inventory | 5.00 | 4.50 | Assumed reduction for condition and ability to sell |
| Land and buildings | 8.00 | 11.00 | Illustrative increase that would require real valuation evidence |
| Remaining machinery | 4.00 | 4.00 | Does not reverse the THB 0.80 million impairment through this NAV adjustment |
| Other assets | 0.50 | 0.50 | Assume no additional adjustment |
| Total assets | 24.00 | 26.30 | Assets already sold are not in this base |
| Operating payables | 4.00 | 4.00 | Related obligation included in the asset approach |
| Interest-bearing debt | 6.00 | 6.00 | Already included in total liabilities |
| Warranty provision from operations | 1.00 | 1.00 | Not an unpaid restructuring balance |
| Tax effect of asset adjustments | 0.00 | 0.60 | Case-specific assumed effect, not a fixed tax rate |
| Total liabilities | 11.00 | 11.60 | Deduct all shown obligations once |
| Net asset value | 13.00 | 14.70 | 26.30 − 11.60 gives equity value |
With all cash and debt already in the NAV table, do not add cash or deduct net debt again. THB 14.70 million divided by one million shares is THB 14.70 a share. Increasing land and buildings by THB 3 million does not automatically restore value to impaired machinery. The THB 0.60 million tax effect is a separately disclosed assumption, not a mechanical tax rate applied to the asset uplift without examining the facts.
This NAV is not a guaranteed minimum sale price. A rushed sale could involve discounts, removal costs, brokers, contract termination, employee costs, and taxes different from a going-concern basis. Conversely, a well-run business may have value in people, systems, customers, or rights not reflected in the displayed assets. Their absence from the accounts does not prove they have no value.
From book equity to adjusted NAV
- 1 Book equity: 13.00
- 2 Net asset adjustment: +2.30
- 3 Added liability adjustment: −0.60
- 4 Adjusted NAV: 14.70
Choose a method that fits how the business earns
| Business type | Methods to emphasize in analysis | What else to check |
|---|---|---|
| Systems integration or software partnership with project revenue | DCF when forecasts have evidence, alongside multiples from genuinely comparable businesses | Profit by project, delivery backlog, billing rights, dependence on the owner and key staff, and major customers |
| Service software with renewal revenue | DCF and market data aligned with its revenue and growth pattern | Renewals, churn, system upkeep, customer acquisition, and actual investment needs |
| Operating factory | DCF and multiples on matched bases, with adjusted NAV checking the asset structure | Saleable capacity, machinery life, replacement investment, inventory, land rights, and environmental obligations if present |
| Asset-holding business or a business considering closure | An asset approach on the basis relevant to that decision | Recoverable value, sale time and costs, taxes, and obligations. Do not use a going-concern basis for closure without adjustment. |
A systems integrator with a few skilled people and cancellable contracts should not be treated as though all its income renews automatically. A software business with actual renewing customers should not be valued only by the computers and cash on its balance sheet. Continuity and the cost of sustaining that revenue still need evidence.
For the factory, NAV shows how asset value may differ from book balances. DCF shows that owning machinery does not guarantee cash from selling products. Using both should improve our questions, not lead us to add the results together: they view the same operating assets from different angles.
Compare results on the same equity basis
Shared horizontal axis: equity value, THB millions
When values differ, find the reason before the average
In this hypothetical case, DCF produces THB 27.11 million of equity value, EV/EBITDA THB 20 million to THB 28 million, P/E THB 21.60 million to THB 30.24 million, and adjusted NAV THB 14.70 million. The underlying evidence is not equally strong: DCF depends on forecasts and long-term assumptions, the example's multiples are simply chosen values, and NAV depends on asset and liability value assumptions.
There is no reason yet to weight them equally and average a company price. Ask whether DCF exceeds NAV because operating profit is sustainable or the forecast is too optimistic. Do real market multiples include control rights or merger benefits? Is a liability or cost missing from the asset base? Any control or liquidity adjustment needs evidence, not a customary discount or premium inserted by habit.
Turn valuation into work people can do
Business owners should begin with evidence for the earnings they want a buyer to trust. Separate revenue and profit by job, customer, and service. List delivery obligations still outstanding and reduce owner dependence where duties can be transferred. Clearer records do not guarantee a higher multiple, but they reduce price disputes caused by missing information.
Buyers or investors should work backward from the proposed price to the assumptions that must hold. Check cash collected after the reporting date, key contracts, receivables and inventory quality, and investment still to be made. If a case depends on savings or added sales after combining businesses, separate those from the existing business's value and do not count the same benefit in both forecasts and a premium.
Accounting and finance teams should bridge reported earnings to analytically adjusted earnings, then to cash and valuation assumptions. Give every adjustment evidence, an owner, and a future effect. A single change to revenue recognition or cost estimation can affect earnings, receivables, working capital, and value. Do not change only the earnings cell multiplied by a price.
Before agreeing on a company price, I want a table that distinguishes facts, assumptions, and missing information. A valuation whose conditions can be explained supports a better negotiation and decision than one precise-looking number no one can trace.
Further reading
For matching bases and assessing whether a multiple fits, see Aswath Damodaran's Relative Valuation, NYU Stern. For a comparison of valuation approaches, see Intrinsic vs Relative Value. The multiples, NAV table, and SI and factory questions here are hypothetical examples and analytical proposals for this series, not transactions reported by those sources.
Concept sources were checked on October 18, 2026. The figures are learning assumptions, not market prices or a valuation of any company. Adapt the analysis to real data and the engagement's scope before deciding.
