Valuation: Comps & Precedents
Quick mental math: peers trade at a median P/E of 15x. Your target has net income of $80m and 100m diluted shares. What is the implied share price?
Model answer
Implied equity value = net income x P/E = $80m x 15 = $1,200m. Implied share price = $1,200m / 100m diluted shares = $12.00. Note the shortcut: because P/E is an equity multiple paired with an equity…
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.