Valuation: Comps & Precedents
Company A trades at 10x EV/EBITDA growing EBITDA at 25%; Company B trades at 7x growing at 5%. Which is cheaper on a growth-adjusted basis?
Model answer
Divide the multiple by the growth rate (the EV/EBITDA analog of a PEG ratio): A = 10 / 25 = 0.40; B = 7 / 5 = 1.40. Per point of growth, A is much cheaper despite the higher headline multiple - the…
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