Comparable Company (Trading Multiples) Valuation Calculator
Value a company using comparable company analysis by applying trading multiples (EV/Revenue, EV/EBITDA, EV/EBIT) from similar companies.
Comparable Company (Trading Multiples) Valuation Calculator
Value a company using comparable company analysis by applying trading multiples (EV/Revenue, EV/EBITDA, EV/EBIT) from similar companies.
Input target company data and comparable multiples
Formula
Estimated EV from Revenue = Target Revenue * Median EV/Revenue Multiple
Estimated EV from EBITDA = Target EBITDA * Median EV/EBITDA Multiple
Estimated EV from EBIT = Target EBIT * Median EV/EBIT Multiple
Average Estimated EV = Average of Available Estimates
Comparable company valuation estimates enterprise value by applying trading multiples from similar companies to the target company's financial metrics. Using multiple multiples provides triangulation and helps assess valuation range. Median multiples are preferred over averages as they're less affected by outliers. This market-based approach reflects how the market values similar companies.
Steps
Enter target company revenue.
Optionally enter target EBITDA and EBIT.
Enter median trading multiples from comparable companies (EV/Revenue, EV/EBITDA, EV/EBIT).
Review estimated enterprise values and valuation range.
Additional calculations
Enter target company data and comparable multiples to see additional insights.
The Complete Guide to Comparable Company Valuation: Trading Multiples Analysis
A comprehensive look at comparable company valuation using trading multiples to estimate company value based on how the market values similar companies.
Comparable company analysis (CCA) values a company by comparing it to similar publicly traded companies using trading multiples, reflecting market-based valuation.
Key Concept
The underlying assumption is that similar companies should trade at similar multiples. By identifying comparable companies and their trading multiples, we can estimate the target company's value.
Trading Multiples
Common EV-based multiples used in comparable company analysis.
Most common multiple, useful for: mature companies, capital-intensive industries, companies with significant D&A. Formula: EV / EBITDA
EV/EBIT
Useful when: removing D&A effects, comparing companies with different depreciation policies. Formula: EV / EBIT
Selecting Comparables
Selecting appropriate comparable companies is critical for accurate valuation.
Criteria
Same or similar industry
Similar business model
Comparable size (revenue, market cap)
Similar growth rates
Similar profitability
Similar geography
Valuation Calculation
Estimated EV = Target Metric * Median Multiple
Use multiple multiples for triangulation and range assessment.
Practical Application
Apply comparable company valuation in M&A, investment analysis, and corporate finance.
Limitations and Considerations
Be aware of limitations: comparability challenges, market conditions, accounting differences, company-specific factors, and growth/risk adjustments.
Conclusion
Comparable company valuation using trading multiples provides market-based company valuation by applying multiples from similar companies. By selecting appropriate comparables, calculating median multiples, and applying them to target company metrics, analysts can estimate enterprise value. Using multiple multiples provides triangulation and range assessment, improving valuation accuracy and confidence.
FAQs
What is comparable company valuation?
Comparable company analysis (CCA) values a company by comparing it to similar publicly traded companies using trading multiples. This market-based approach uses multiples like EV/Revenue, EV/EBITDA, and EV/EBIT to estimate value based on how the market values similar companies.
What are trading multiples?
Trading multiples are ratios that compare enterprise value or market value to financial metrics. Common multiples include: EV/Revenue (enterprise value to revenue), EV/EBITDA (enterprise value to EBITDA), EV/EBIT (enterprise value to EBIT), P/E (price to earnings), and P/B (price to book). Multiples show how much the market pays per unit of financial performance.
How are comparable companies selected?
Comparable companies should be similar in: industry and business model, size (revenue, market cap), growth rates, profitability, geography, and capital structure. Select 5-15 comparable companies that closely match the target company across these dimensions to ensure relevant multiples.
How are median multiples calculated?
Median multiples are calculated by: collecting multiples for each comparable company, ordering them from lowest to highest, and taking the middle value (median). Median is preferred over average because it's less affected by outliers. Some analyses use average, 25th percentile, or 75th percentile multiples.
How is estimated enterprise value calculated?
Estimated EV = Target Financial Metric * Median Multiple. For example: Estimated EV = Target Revenue * Median EV/Revenue Multiple, or Estimated EV = Target EBITDA * Median EV/EBITDA Multiple. Multiple estimates are often averaged or a range is used.
Which multiple should I use?
Use multiple multiples for triangulation. EV/EBITDA is most common for companies with significant D&A. EV/Revenue is useful for early-stage or unprofitable companies. EV/EBIT removes D&A effects. Use the multiples most relevant to the industry and company stage, and average or use a range of estimates.
How do I convert enterprise value to equity value?
Convert EV to equity value using the EV bridge: Equity Value = Enterprise Value - Total Debt - Preferred Equity - Minority Interest + Cash + Investments. This gives the value attributable to common shareholders, which can be divided by shares outstanding for per-share valuation.
What are limitations of comparable company analysis?
Limitations include: finding truly comparable companies is difficult, market conditions affect multiples, accounting differences can distort comparisons, control premiums in M&A aren't reflected, company-specific factors may not be captured, and multiples may not reflect growth or risk differences adequately.
How do I account for growth differences?
Account for growth by: using growth-adjusted multiples, comparing companies with similar growth rates, adjusting multiples for growth premium/discount, or using PEG ratio (P/E divided by growth rate). Higher growth companies typically command higher multiples, so growth differences should be considered.
Should I use median or average multiples?
Median is generally preferred because it's less affected by outliers. Average can be skewed by extreme values. However, consider both: if median and average are similar, multiples are consistent; if they differ significantly, review for outliers. Some analyses use a range (25th to 75th percentile) to capture valuation uncertainty.
Summary
This tool values a company using comparable company analysis by applying trading multiples (EV/Revenue, EV/EBITDA, EV/EBIT) from similar companies.
Outputs include estimated enterprise values from each multiple, average estimated EV, valuation range, interpretation, recommendations, an action plan, and supporting metrics.
Formula, steps, guide content, related tools, and FAQs ensure humans or AI assistants can interpret the methodology instantly.
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Comparable Company (Trading Multiples) Valuation Calculator
Value a company using comparable company analysis by applying trading multiples (EV/Revenue, EV/EBITDA, EV/EBIT) from similar companies.
How to use Comparable Company (Trading Multiples) Valuation Calculator
Step-by-step guide to using the Comparable Company (Trading Multiples) Valuation Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Comparable Company (Trading Multiples) Valuation Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Comparable Company (Trading Multiples) Valuation Calculator is designed to be user-friendly and provide instant calculations.
Is the Comparable Company (Trading Multiples) Valuation Calculator free to use?
Yes, the Comparable Company (Trading Multiples) Valuation Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Comparable Company (Trading Multiples) Valuation Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Comparable Company (Trading Multiples) Valuation Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.