Usually, investors analyse a company as one singular entity based on their consolidated earnings, balance sheet and cash flows. While they aren’t wrong, one can gain a much more accurate valuation using a sum-of-the-parts (SOTP) valuation. For a company with different business segments, each segment would then be valued using ranges of multiples for that particular segment. Using such a method, it would give us a better understanding of the company and each division.

Vodafone does not consolidate Verizon Wireless and, as a result, sell-side analysts seem to ignore its significant value

- David Einhorn

By breaking down the company into its different business divisions, many a times, it would allow us uncover information like whether the group’s consolidated earnings are being dragged down by one business division. Looking at Sinwa Limited, the group’s consolidated earnings were being dragged down due to their engineering division. Upon cutting the loss making division, ...

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