Valuation: Comps & Precedents
How do you actually construct normalized (mid-cycle) earnings for a cyclical company in a comps analysis?
Model answer
Common approaches
- through-cycle margin - average the EBITDA margin over a full cycle (peak to peak or trough to trough, often 7-10 years) and apply it to current or normalized revenue
- …
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from Valuation: Comps & Precedents
- What are the main valuation methodologies?
- Why might trading comps and precedent transaction comps give different values?
- Why is EV/EBITDA often preferred over P/E for comparing companies?
- What are the three primary valuation methodologies a banker uses, and in one line each, what is each based on?
- Which of the standard valuation methodologies tend to produce the HIGHEST and the LOWEST values, and why?
- Walk me through how you perform a comparable companies analysis.