UBS WARBURG VALUATION PRIMER SERIES

0 Comments

When using multiples to compare similar companies in a peer group as part of a comparable companies analysis , it is necessary to ensure that the comparison is “apples-to-apples”. The choice of multiple s in valuing and comparing companies depends on the nature of the business or the industry in which the business operates. However, revenue is a poor metric by which to compare firms, since two firms with identical revenues may have wildly different margins. Valuation multiples are the quickest way to value a company, and are useful in comparing similar companies comparable company analysis. We will focus our discussion here on flows. In practice, we generally refer to some multiples using the denominator only, because the numerator is implied.

Historical valuation multiples are usually calculated over the last twelve month LTM period. Not all earnings are created equal, as equity research analysts may use either reported earnings or adjusted cash earnings in the calculation of EPS. EPS figures may be either as-reported or adjusted as described below. PEG ratios are more flexible than other ratios in that they allow the expected level of growth to vary across companies, making it easier to make comparisons between companies in different stages of their life cycles. To figure out which multiples apply to a business you are considering, try looking at equity research reports of comparable companies to see what analysts are using. Multiples are expressed as a ratio of capital investment to a financial metric attributable to providers of that capital. In practice, we generally refer to some multiples using the denominator only, because the numerator is implied. Recall, that the value of a firm is theoretically independent of capital structure.

Additionally, EV multiples are typically less affected by accounting differences, since the denominator is computed higher up on the income statement.

Not all earnings are created equal, as equity research analysts may use either reported earnings or adjusted cash earnings in the calculation of EPS. Unlike EBITDA, EBIT recognizes that depreciation and amortization, while non-cash charges, reflect real expenses associated with the utilization and wear of a firm’s assets that will ultimately need to be replaced.

With this understanding of the relationship between numerator and denominator, we can invent ubw any multiple we like to value a business, so long as the multiple is, of course, relevant to that business.

  GANGLAND NORTENOS EPISODE

Valuation multiples are the quickest way to value a company, and are useful in comparing similar companies comparable company analysis.

These projections are usually provided on a calendar year basis for consistency, but it is necessary to verify that all such estimates use the same yearly basis either calendar or fiscal to make apples-to-apples comparisons.

Please note that Macabacus no longer supports Internet Explorer versions 7 and 8. One very important point to note about multiples is the valuayion between the numerator and denominator.

Then, compare the analyst’s figures with reported and adjusted results to determine which is used by the analyst. Therefore, the relevant denominator must be computed before interest expense, preferred dividends, and minority interest expense.

UBS Valuation Multiples Primer

Projections, or forward estimates, are made by equity research analyst estimates, and often averaged for use in calculating valuation multiples. Therefore, the relevant denominator must be computed after interest, preferred dividends, and minority interest expense.

Build models 5x faster with Macabacus for Excel. Enterprise value multiples are better than equity value multiples because the former allow for direct comparison of different firms, regardless of capital structure. Unlevered free cash flow UFCF is the free cash flow attributable to all suppliers of capital shareholders and debt holders.

The denominator may be either a stock or a flow.

We will focus our discussion here on flows. Analysts will often use adjusted EPS figures when adjusted earnings are made available by the company. The choice of multiple s in valuing and comparing companies depends on the nature of the business or the industry in which the business operates.

If you are looking for more information on valuation multiples, check out this excellent primer published by UBS Warburg. EPS figures may primr either as-reported or adjusted as described below.

Recall, that the value of a firm is theoretically independent of capital structure.

However, revenue is a poor metric by which to compare firms, since two firms with identical revenues may have wildly different margins. When using multiples to compare similar companies in a peer group as part of a comparable companies analysisit is necessary to ensure that the comparison is “apples-to-apples”. Adjusted serirs figures often add back non-cash expenses like stock-based compensation, amortization, restructuring charges.

Since enterprise value EV equals equity value plus net debt, EV multiples are calculated using denominators relevant to all stakeholders both stock and debt holders. Multiples are expressed as a ratio of capital investment to a financial vxluation attributable to providers of that capital. They attempt to capture many of a firm’s operating and financial characteristics e.

  THE MAGALUF WEEKENDER SERIES 2 EPISODE 6

To figure out which multiples apply priemr a business you are considering, try looking at equity research reports of comparable companies to see what analysts are using. Historical valuation multiples are usually calculated over the last twelve month LTM period.

In practice, we generally refer to some multiples using the vxluation only, because the numerator is implied.

Valuation Multiples

Enterprise Value Valuation Methods. To see if the company releases adjusted results, check the warburrg filing concerning the most recent earnings release. Equity value multiples, on the other hand, are influenced by leverage. On the other hand, equity value multiples are calculated using denominators relevant to equity holders, only.

The analyst’s numbers may not match either set of figures, but should be close enough to indicate which set he or she is using. There is no standard time frame for measuring expected EPS growth, but practitioners typically use a long-term, or 5-year, growth rate. Most publicly traded companies are valued based on their projectedrather than historical, earnings and cash flows.

This means that the va,uation of all multiples compared should span the same time period, whether historical or projected, and be adjusted for serise same items, such as stock-based compensation.

UBS Valuation Multiples Primer – Wall Street Prep

A stock is measured at a single point in time e. Intrinsic Value FIN Empirical evidence shows that forward-looking multiples are more accurate predictors of value than historical multiples. Note that EBIT is an unlevered figure because it is calculated before interest expense.

Unearned Compensation FIN PEG ratios are more flexible than other ratios in that they allow the expected level of growth seriew vary across companies, making it easier to make comparisons between companies in different stages of their life cycles.