What type of valuation would likely undervalue a company due to omitted intangibles?

The asset-based approach to valuation focuses primarily on the tangible assets of a company, such as property, equipment, and inventory, while often neglecting intangible assets like brand reputation, customer loyalty, patents, and intellectual property. This approach calculates a company's value by taking the total assets and subtracting liabilities, thereby presenting a clear view based on what can be physically measured.

However, by omitting these intangible assets, this method may result in a significantly lower valuation that does not reflect the true potential or market value of the company. Intangible assets can be a substantial part of a company's worth, especially in industries like technology and pharmaceuticals, where innovations and brand equity can drive value beyond mere physical assets. Therefore, relying solely on the asset-based approach may lead to an undervaluation of a company that has significant intangible assets.