Open Access

Sebastian Wessner

• This study is aimed at valuing two companies in the IT services industry with different valuation approaches. Therefore, the preconditions for an accurate and meaningful business value as well as the procedure, strengths and limitations of these approaches are examined. Additionally, the accuracy of the results is determined through comparison of valuation estimates with their corresponding stock prices occurring within the three months following the business valuations. Furthermore, it is examined if one valuation approach is superior in terms of accuracy. Finally, to verify the quality and explanatory power of the valuation results, they are compared with the outcomes of the study on the information content of equity analyst reports by Paul Asquith, Michael B. Mikhail and Andrea S. Au. The results of the business valuations show that within the three-month period, no price target was exactly achieved by the corresponding stock prices. Furthermore, no valuation approach could be determined that is significantly more accurate than the others. It can be concluded that despite some limitations in the explanatory power of the valuations, the average percentage approximations of Mastercard’s and Visa’s stock prices to target prices were only slightly below those of the comparative study. In view of the fact that the research capacities and experience behind these business valuations are significantly lower than those of the top analysts in the comparative study, the results are considered consistent with the outcomes of the study on the information content of equity analyst reports.