How do investors typically utilize the two methods for valuation?

Investors typically utilize two methods for valuation by applying one method and then backing into an implied value for the other as a check. This approach allows investors to cross-verify the valuations derived from different methodologies, ensuring robustness in their financial analysis.

For instance, an investor might calculate a company's value using a discounted cash flow (DCF) analysis and then use market comparables to derive a market valuation. By comparing the outputs of both methods, they can assess whether their assumptions and inputs are reasonable or if further adjustments are needed. This practice helps in reducing the risk of relying solely on one valuation method, which may have inherent biases or inaccuracies due to differing assumptions.

By using this method of implied values, investors gain greater confidence in their valuation conclusions, leading to more informed investment decisions.