Which valuation method helps assign a value based on future cash flows and competitive advantage?

The chosen method, which assigns value based on future cash flows and competitive advantage, is the SVA analysis, or Shareholder Value Added analysis. This approach emphasizes the importance of generating returns that exceed the cost of capital, which is a key indicator of a company's economic performance. By focusing on future cash flows, SVA analysis allows for a predictive assessment of a company's potential to create value for its shareholders.

The concept of competitive advantage is intrinsic to the SVA approach, as it evaluates not just the cash flows themselves, but also the sustainability of those flows in relation to the competition. A company with a strong competitive advantage is likely to retain more value over time, as it can maintain higher profit margins and potentially grow its market share more effectively than its competitors.

This distinct focus on both future cash flows and competitive positioning differentiates SVA analysis from other valuation methods, which may either emphasize historical data or market comparisons without taking into account the future potential of a company to generate cash flows that create value for shareholders.