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 ...
Furthermore, financial analysts are more likely to consider SOTP the dominant or preferred valuation model in their report. We show that managers disclose a greater quantity of segmental information if their firms are considered difficult to analyze and value by investors and creditors, thereby ...
Sum of the Parts (SOTP) analyzes the value of each business segment separately, which are added to arrive at an implied valuation.