Learning Valuation: Essential Models, Skills, and Tools for Success

Why Should You Learn Valuation?

If you’re looking to build a career in investment banking, equity research, private equity, or FP&A, valuation is a core skill you’ll need to master. Financial analysts use valuation models to assess how much a company is worth, if buying another company is a good deal, and identify good investment opportunities.

But let’s be honest — learning valuation can feel overwhelming at first. The good news? You don’t need to learn everything at once. Structured learning paths, hands-on exercises, and expert guidance make learning valuation easier than you think. This guide explores two fundamental valuation models — comparable trading and precedent transactions — along with must-have financial analysis and modeling skills and essential learning and practice tips.

Master Foundational Valuation Models First

Analysts use different methods to value companies. Two common approaches are comparable trading analysis and precedent transaction analysis. Both are considered market-based valuation techniques, meaning they derive value based on how similar companies or deals are priced in the market.

Comparable Trading Analysis (Trading Comps)

Comparable trading analysis is used to estimate a company’s value by comparing it to similar publicly traded companies. 

In comparable valuation, analysts look at key valuation multiples like EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization) to assess how companies in the same industry are valued. This method provides a real-time market benchmark for valuation, making it useful for understanding current market expectations.

A common mistake in comparable valuation is selecting the wrong peer group. It’s essential to choose companies with similar industry characteristics, revenue models, and financial structures to ensure meaningful comparisons and accurate results.

Precedent Transaction Analysis

Precedent transaction analysis evaluates a company’s worth based on previous mergers and acquisitions (M&A) transactions in the same industry. Analysts examine past acquisition prices, control premiums, and deal structures to estimate how much a company might sell for in a similar transaction.

This method is particularly useful in M&A deal structuring, helping professionals understand pricing trends and investor behavior. However, adjustments must be made for deal-specific factors such as synergies and transaction terms, ensuring that valuations align with current market conditions.

By analyzing past M&A deals, finance professionals can identify patterns in how companies are valued and apply these insights to new transactions.

Football Field Analysis: How Analysts Visualize Valuation Ranges

After calculating valuations using various methods, analysts use a football field chart to visualize valuation ranges. A football field chart helps compare trading comps, precedent transactions, and other valuation models in one easy-to-read format. 

Decision makers use it to evaluate high and low valuation estimates, giving a clearer picture of a company’s potential value.

Financial Modeling and EV/EBITDA Calculations in Valuation

To succeed in valuation, analysts must develop strong financial modeling skills and a solid understanding of key valuation multiples like EV/EBITDA. These skills help professionals assess company value, compare market performance, and make informed investment decisions.

1. Financial Modeling in Excel

Accurate valuation starts with well-structured financial models. Analysts use Excel to build dynamic, assumption-driven models that support valuation calculations and model validation. These models allow professionals to analyze different financial scenarios and assess company performance under various conditions.

A well-built model must prioritize clarity, flexibility, and auditability. Proper structuring ensures that calculations remain transparent, easy to update, and adaptable for different valuation approaches. Without these elements, models can become difficult to interpret or prone to errors, leading to inaccurate valuations.

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2. EV/EBITDA Calculation: Getting it Right

Among valuation multiples, EV/EBITDA is widely used to compare companies. However, early-career analysts often make mistakes when calculating Enterprise Value (EV) and EBITDA, which can distort valuation outcomes.

Common errors include:

• Misclassifying debt and cash adjustments, leading to incorrect enterprise value calculations.
• Overlooking non-controlling interests, which skews the valuation of companies with subsidiary holdings.
• Failing to normalize EBITDA, which can result in inconsistent comparisons between companies.

Ensuring accurate EV/EBITDA calculations is essential for identifying undervalued or overvalued companies, supporting investment decisions, and improving financial modeling accuracy.

Building Valuation Expertise: How to Practice & Improve

The best way to master valuation is hands-on practice. Here’s a simple three-step approach to improving your skills:

1. Work Through a Basic Comparable Valuation Model

• Use pre-built Excel templates to practice — check out CFI’s free Comparable Company Analysis Template!
• Calculate EV/EBITDA multiples for a real company. Check out CFI’s free in-depth guide for explanations, examples, and a calculator!

2. Select a Peer Group for Comparable Trading Analysis

• Refer to business and financial characteristics (industry, size, profitability).
• Practice with CFI’s Comparable Company Analysis Template!

3. Build a Football Field Analysis

• Compare valuation ranges from different techniques.
• Use visualization to present findings clearly. Practice with CFI’s free, downloadable Football Field Chart Template!

Take the Next Step to Mastering Valuation

Learning valuation means developing the ability to analyze financial data, build models, and interpret market trends to make informed business decisions. By focusing on comparable valuation, mastering Excel modeling, and practicing with real data, you’ll gain the skills employers look for.

The most effective way to build valuation expertise? Structured courses, hands-on case studies, and guided practice. Earning a CFI Financial Modeling & Valuation Analyst (FMVA®) Certification equips you with in-depth valuation skills, hands-on financial modeling experience, and practical case studies to enhance your expertise.

Earn Your Certification!

Additional Resources

Relative Valuation Models

Intrinsic Valuation Guide

EV/EBITDA Ratio Guide

See all Valuation resources