everyfirmthatisvalued,butitwillbeimpossibletoseparate
howmuchoftheresultcanbeattributedtoviewsaboutthe
firm and how much to macroeconomic judgments.
7.Avoidvaluationgarnishing.Aswehavenotedallthrough
thisbook,analystsareliberalaboutattachingpremiumsand
discountstoestimatedvalueforfactorsrangingfromcontrol
toilliquidity.PartThreeisdedicatedtothepropositionthat
whilecontrol,illiquidity,andintangiblesallaffectvalue,itis
our job when valuing companies to incorporate these
elementsintothevalueratherthanadding 20 percenttovalue
(for control or intangibles) or deducting 20 percent (for
illiquidity).
8.Rememberthatnotwofirmsareidentical.Muchofrelative
valuationisbuiltonthepremisethatwecanfindfirmsthat
lookjustlikethefirmthatwearevaluing.Inreality,notwo
firmsareexactlyalikeandthenotionofacomparablefirmis
subjective.Inotherwords,nomatterhowhardwetrytomake
relative value judgments, the differences across firms will
color our analysis.
9.Tellastorybutlookatthedata.Whileitishumannatureto
tellastorytojustifywhyacompanyistradingorshouldbe
tradingataparticularvalue,storytellingbyitselfcanbecome
a dangerous exercise of justifying our prior biases about
companies.Wehaveanobligationtolookatthedatanotonly
toseeifthestorybeingtoldmakessensebuttofleshoutthe
details.
10.Bewarethepurists.Witheveryvaluationapproach,there
arepuristsdemandingcompleteandtotalacceptanceoftheir
preferred methods.Valuation does not lenditself easilyto