What is one reason to examine both historical and projected metrics in valuation methodologies?

When it comes to valuation methodologies, examining both historical and projected metrics provides a more comprehensive view of a company's performance and potential. Historical metrics, while useful, can sometimes be misleading due to the presence of non-recurring items, such as one-time gains or losses, which can distort the actual operational performance of the business. By identifying these anomalies, analysts can adjust historical figures to provide a clearer picture of the company’s ongoing financial health.

Conversely, projected metrics often rely on assumptions and estimates that may not materialize, which is why they need to be evaluated in the context of historical data. This dual examination ensures that the valuation is based on a reliable foundation, weighing past performance against future expectations. The combination of both analyses allows for a more robust and informed valuation assessment.