Successful and long lasting companies tend to be well-managed by humble leaders who treat shareholders as owners and are passionate about their business. These companies usually exhibit some wonderful forms of durable competitive advantage. A corporation with sustainable competitive advantage is more predictable and often can trades on its own terms.
You goal is to identify the main durable competitive advantage of the company you are considering. You can focus on the company’s customers, operations, finances and people for pointers. Look for companies that are unlikely to experience major change and that they are virtually certain to possess enormous competitive strength then or 20 years from now.
A thorough analysis of the company can help you to detect trends and get an overall picture of the risk associated with the business which you’ll need in order to select an appropriate capitalization rate or discount rate in valuing the company. It will also help you to zero-in on the most appropriate valuation method to use.