What Is a Certified Valuation Analyst and What Do They Do?

Understanding the role of a Certified Valuation Analyst (CVA) is essential for businesses and individuals involved in financial transactions. These professionals assess the value of companies, assets, or liabilities, significantly impacting decision-making processes. As financial landscapes grow more complex, the expertise of CVAs becomes increasingly valuable. This article explores their responsibilities, credential requirements, valuation methods, and how this designation is applied across various scenarios.

Primary Responsibilities

Certified Valuation Analysts (CVAs) determine the value of businesses, assets, and liabilities by analyzing financial statements, market trends, and economic conditions. They review balance sheets, income statements, and cash flow statements to assess a company’s financial health and potential growth while factoring in external elements like industry performance and economic indicators.

CVAs gather market data to support their valuations, comparing the subject company to similar businesses, examining recent transactions, and considering market dynamics. This ensures accurate, reliable valuations stakeholders can trust. They also prepare detailed valuation reports adhering to standards set by the National Association of Certified Valuators and Analysts (NACVA). These reports are essential tools used in litigation, mergers and acquisitions, or financial reporting, presenting complex financial information in a clear, actionable manner.

Credential Eligibility

To earn the Certified Valuation Analyst (CVA) designation, candidates must meet eligibility criteria set by NACVA. This typically includes a relevant academic degree in fields like finance, accounting, or economics, along with at least two years of valuation-related professional experience.

Candidates must complete NACVA’s rigorous training program, covering valuation principles and financial statement analysis, and pass an examination. This exam tests their ability to apply valuation techniques in real-world scenarios, ensuring they are prepared to perform professional valuations.

Key Valuation Methods

Certified Valuation Analysts apply three primary methods to determine value: market, income, and asset approaches, each offering unique insights.

Market

The market approach compares the subject company to similar businesses that have been sold or are publicly traded. Analysts rely on metrics like price-to-earnings (P/E) ratios and enterprise value-to-EBITDA (EV/EBITDA) multiples. For example, if a comparable company sold for a P/E ratio of 15 and the subject company has earnings of $2 million, the implied valuation would be $30 million. Analysts must account for differences in size, growth prospects, and market conditions to ensure accurate comparisons.

Income

The income approach focuses on the present value of expected future cash flows. Analysts often use the discounted cash flow (DCF) model, projecting future cash flows and discounting them to their present value using a discount rate that reflects risk. For instance, if a company is expected to generate $5 million annually and the WACC is 10%, the present value of these cash flows over five years would be approximately $18.95 million. This method requires precise financial projections and risk assessments.

Asset

The asset approach, also known as the cost approach, values a company based on the net value of its assets minus liabilities. This method is commonly used for asset-intensive businesses or companies not generating sufficient income to justify other valuation methods. Analysts assess the fair market value of tangible and intangible assets, such as real estate, equipment, and patents, subtracting liabilities. For example, if a company has assets worth $50 million and liabilities of $20 million, its net asset value would be $30 million. This approach is particularly relevant in liquidation scenarios or for holding companies with significant asset bases.

Typical Uses of the Designation

Certified Valuation Analysts play a crucial role in finance and strategic decision-making. In mergers and acquisitions, they determine fair purchase prices, aiding negotiations and aligning financial expectations with strategic goals. In financial reporting, CVAs ensure accurate representation of a company’s worth in compliance with accounting standards like GAAP and IFRS.

In litigation, CVAs provide objective valuations that can serve as evidence in disputes involving economic damages or shareholder disagreements. Courts often rely on these assessments for fair settlements or damage awards. Additionally, in estate planning and taxation, CVAs help value business interests for gift and estate tax purposes, ensuring compliance with IRS guidelines.

Ongoing Professional Requirements

Maintaining the Certified Valuation Analyst (CVA) designation requires ongoing education and adherence to professional standards. This ensures CVAs remain proficient and updated on evolving valuation practices, regulatory changes, and economic trends.

CVAs must complete 36 hours of continuing professional education (CPE) every three years. These hours can be earned through NACVA-sponsored events, webinars, or other educational opportunities covering topics like updated valuation methodologies or tax law changes. For example, as cryptocurrency and blockchain assets become more prevalent, CVAs must understand how to value these emerging asset classes.

Additionally, CVAs must follow NACVA’s Professional Standards, which include ethical and technical guidelines for conducting valuations. This involves maintaining objectivity, avoiding conflicts of interest, and ensuring transparency in valuation reports. Periodic peer reviews assess compliance, reinforcing the credibility of the CVA credential and ensuring clients trust the valuations provided.