Sum of the Parts (SOTP) analyzes the value of each business segment separately, which are added to arrive at an implied valuation.
Once you know the various segments, you must then pick avaluation methodfor each one. You would most likely pick either a DCF (intrinsic value) or Comps model (relative value) to value each one. In the example from CFI’sAmazon Valuation Course, we use Comps to value each segment and ...
Sum-of-the-parts valuation, also known asbreakup valueanalysis, helps a company understand its true value. For example, you might hear that a young technology company is "worth more than the sum of its parts," meaning the value of the company's divisions could be worth more if they were...