The field of ascertaining the appropriate valuation model is a complicated field and as such, to determine the valuation approaches deployed by analysts, primary research method can be applied in which the analysts are asked to give a brief description of the valuation models they apply. The questionnaire method may be used to collect the opinions of the analysts about various valuation methods and the ranking they assign to the various valuation models. They can also be asked for the number of models they use and the context that determines the choice of the models (Modell, 2007). The data gathered can be analyzed through the process of qualitative content analysis to identify the most preferred approaches and the context which determines the selection of the model.
It is expected that the analysts would, on an average basis, rarely emphasize on only one approach of valuation. They would be using different approaches (Giddy, 2006), wherein the screening would be done with methods which are easier to apply like the PE ratio, while a through valuation would be conducted by Discounted Cash Flow Valuation Methods.
In a nutshell, it can be concluded that valuation is not a one time process, but it is a forward looking exercise which must be conducted consistently on a periodic basis. As stated by Demirakos, Strong & Walker (2004), analysts do not rely on a particular valuation model only, but they use wide range of methods so as to ascertain the intrinsic value of the asset or the security (Shaked, 2009). The value is computed by calculating a weighted average estimate of the value from the wide range of values obtained from different methods. The choice of the model applied is contingent on various factors that relate to the purpose for which the process of valuation is being performed along with the stage of the life-cycle to which the company belongs, the dynamics and characteristics of the industry in which the company operates, and various other factors like the dividend payout patterns and policies of the company, etc.