Valuation of a Business depending on its Life Cycle Stage

#QuickPill

🤔 How can a business be evaluated depending on its life cycle stage? Read more below ↴

🐣 Until a company is not deemed to be mature, Enterprise Value multiples are useful for its valuation

🌱 At an early stage, Enterprise Value (Market Capitalization + Net Debt) is divided by Sales - since only revenues can be positive 

📈 When the firm grows, more appropriate multiples can be EV / EBITDA or EV / EBIT ➛ economics results can be, in this stage, taken into consideration as they show interesting operating margins and cash flows

🏩 When a company is finally evolved and stable, PRICE / EARNINGS is an equity multiple that fits better in the valuation: this is the case when not only the trend of economic results but also capital structure is steady and mature.

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