đ Comparable Company Analysis is a method of deriving the value of a business looking at other similar public companiesâ worth and financial data
đ Itâs part of the broadest Market Approach of evaluating a business
đŁ The Steps to perform it are:
1ď¸âŁ 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
2ď¸âŁ Gather financial data (Revenues, Market Capitalization, Net Debt, EBITDA, EBIT, Net Profit, etc.) referred to the last 3-5 years for each comparable company
3ď¸âŁ Find out what analysts think about future performances of those companies, so that you can make a future estimate of the financial data above
4ď¸âŁ Calculate comparable ratios (like Enterprise Value/Revenues, given that Enterprise Value = Market Capitalization + Net Debt) and derive the value of the company analyzed
â 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
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