Comparable Company Analysis and the Steps to perform it

#QuickPill

🔎 Comparable Company Analysis is a method of deriving the value of a business looking at other similar public companies’ worth and financial data

🛒 It’s part of the broadest Market Approach of evaluating a business

👣 The Steps to perform it are:

1️⃣ Find comparable companies on Bloomberg or other sites like Capital IQ, by filtering for the industry, geography, size (in terms of sales, employees, assets, etc.) and general economic and financial performances

2️⃣ Gather financial data (Revenues, Market Capitalization, Net Debt, EBITDA, EBIT, Net Profit, etc.) referred to the last 3-5 years for each comparable company

3️⃣ Find out what analysts think about future performances of those companies, so that you can make a future estimate of the financial data above

4️⃣ Calculate comparable ratios (like Enterprise Value/Revenues, given that Enterprise Value = Market Capitalization + Net Debt) and derive the value of the company analyzed

➠ For example, if the average Enterprise Value/Revenues Ratio for the comparable companies is 2.5, then we can find the Enterprise Value of the company analyzed by multiplying its Revenues by 2.5

#corporatefinance #valuation #financialanalysis

#business #company #assets #equity

#cpa #cfa #acca #fmva #fpa