Valuation Triangulation

The single highest-leverage move in valuation triangulation is the assumption-independence check. When three methods converge into a tight range, the natural reading is high-conviction valuation -- but the convergence is only meaningful if the inputs were truly independent. If the DCF used a WACC derived from the comp set's implicit cost-of-capital, and the comp set used a normalization period that matched the DCF base year, and the precedent transactions were filtered to the same vintage as the comp set, the "three methods" are effectively one analytical view repeated three times. Real independence means each method made its own analytical choices about discount rate, growth, normalization, and time window; convergence from independent inputs is genuine evidence, convergence from shared inputs is double-counting. The diagnostic is to read the assumption appendix and ask: were these choices made independently, or aligned for narrative coherence?

Asymmetric weighting is the second non-obvious move in triangulation. Once the three methods produce three numbers, the analyst must decide how much weight to give each. The naive default is to average them (one-third each), but this is rarely correct. For a stable cash-flow business in a mature industry, the DCF is the most reliable input and might deserve 50% weight; comps are a useful cross-check at 30%; precedent transactions are noisy at 20%. For a high-growth business with limited operating history, comps may be the most reliable (current market multiples reflect the consensus growth expectation) and DCF is the weakest (terminal-value assumptions dominate and are highly uncertain). For a takeover-defensive situation, precedent transactions become decision-relevant because they bound the floor a strategic acquirer would pay. A memo that simply averages three numbers without justifying the weighting is skipping one of the most important analytical steps; a memo that explicitly justifies asymmetric weighting is doing the work.

Triangulation is the structural answer to the fact that any single valuation method depends on assumptions the analyst cannot prove. Three independent methods, each with their own assumption-risks, produce three estimates whose convergence or divergence is itself diagnostic information. A tight range from genuinely independent inputs is evidence of high-conviction valuation. A wide range honestly reports which assumptions are most contested and forces the analyst to commit to a view on the contested assumptions. A tight range from shared inputs is a false convergence the analyst has manufactured. The discipline of reading valuation triangulation -- checking input independence, interrogating the weighting, treating the range pattern as information -- is what separates a structural read of a memo from a passive acceptance of its headline number. The same discipline applies to your own memos: triangulate, weight asymmetrically with justification, and report the range honestly even when it is wide.

Going Deeper -- four common pathologies in valuation triangulation. (1) Shared-input convergence: three methods using the same WACC or the same comp set produce a falsely tight range; spot it in the assumption appendix. (2) Equal-weight default: averaging three methods without justifying the weighting hides the analyst's view of which method is most reliable for this business; force yourself to articulate asymmetric weights. (3) Range-hiding: the memo reports a single "fair value" number instead of the range across methods, suppressing the diagnostic information that wide vs tight conveys; ask for the range explicitly. (4) Method-mismatched to business: applying a DCF to a financial firm (where NAV is the right anchor), or applying comp multiples to a unique business with no clean peer set, produces a fake-precise number that is structurally inappropriate for the underlying economics. AI prompt for self-review: "Given this valuation triangulation, identify whether the three method inputs were independent or shared, and whether the weighting across methods is justified for this specific business type." The next module turns from triangulation to the brainteaser-style quant reasoning that underlies many valuation-by-inspection moves a strong analyst makes intuitively.