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Module 2: Multiples Analysis

Module 2: Multiples Analysis. Brian Phelan. Agenda. Multiples background Balance sheet m ultiples Income s tatement multiples HP recommendation Multiples concerns. Multiples Background. First pass analysis Create summary metrics Value = summar y performance measure x market multiple

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Module 2: Multiples Analysis

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  1. Module 2: Multiples Analysis Brian Phelan

  2. Agenda • Multiples background • Balance sheet multiples • Income statement multiples • HP recommendation • Multiples concerns

  3. Multiples Background • First pass analysis • Create summary metrics • Value = summary performance measure x market multiple • 5 steps

  4. 5 Steps • Select summary performance measure • Select comparable companies • Compute market multiple for comparables • Compute target company’s value • Subtract value owed to debt holders and divide by shares outstanding

  5. Balance Sheet Multiples • NEA multiple • Book value equity multiple

  6. Balance Sheet Multiples Data

  7. NEA Multiple

  8. Equity Book Value Multiple

  9. Income Statement Multiples • EPAT multiple • EPAT from sales • Net income • Comprehensive income • Sales multiple • (P-BV)/RD multiple

  10. Income Statement Multiples Data

  11. EPAT Multiple

  12. EPAT from Sales

  13. Net Income Multiple

  14. Comprehensive Income Multiple

  15. Sales Multiple

  16. (P-BV)/RD Multiple

  17. HP Recommendation

  18. Multiples Concerns • How comparable are the companies • The range in multiples for comparables • Be aware of assumptions being made

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