Comparables - Comparable Companies Analysis FIN 461...

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Comparable Companies Analysis FIN 461 Professor Thomas Boulton Rosenbaum and Pearl, Chapter 1
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What is valuation?
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Comparable companies analysis Pros Market based Relativity Quick and convenient Current Cons Market based Absence of relevant comparables Potential disconnect from cash flow Company-specific issues Premise: Similar companies provide a relevant reference point for valuing a target because they share key characteristics (e.g., business, financial, performance drivers, and risks).
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Key Multiples General format: Numerator: Measure of value Denominator: Financial statistic Examples: Equity value multiples (denominator = flows to equity holders): P/E, Equity Value/NI Enterprise value (EV) multiples (denominator = flows to debt and equity holders): EV/EBITDA, EV/EBIT, EV/Sales Sector-specific multiples (see exhibit 1.33, p. 47) EV/EBITD A,
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analysis Steps: 1. Select universe of comparable companies 2. Locate necessary financial information
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Comparables - Comparable Companies Analysis FIN 461...

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