What Are The Flaws With Public Company Comparables? – InterviewSolution

1.

What Are The Flaws With Public Company Comparables?

Answer»

No company is 100% comparable to another company.
The stock market is "emotional" - your multiples might be DRAMATICALLY HIGHER or lower on certain dates DEPENDING on the market's movements.
Share prices for small companies with thinly-traded stocks may not REFLECT their full VALUE.

Discussion

No Comment Found

Related InterviewSolutions

Can You Use Private Companies As Part Of Your Valuation?
How Do You Value A Private Company?
If You Were Buying A Vending Machine Business, Would You Pay A Higher Multiple For A Business Where You Owned The Machines And They Depreciated Normally, Or One In Which You Leased The Machines? The Cost Of Depreciation And Lease Are The Same Dollar Amounts And Everything Else Is Held Constant.
The Ev / Ebit, Ev / Ebitda, And P / E Multiples All Measure A Company's Profitability. What's The Difference Between Them, And When Do You Use Each One?
Why Does Warren Buffett Prefer Ebit Multiples To Ebitda Multiples?
Two Companies Have The Exact Same Financial Profile And Are Bought By The Same Acquirer, But The Ebitda Multiple For One Transaction Is Twice The Multiple Of The Other Transaction - How Could This Happen?
What Are Some Flaws With Precedent Transactions?
You Mentioned That Precedent Transactions Usually Produce A Higher Value Than Comparable Companies - Can You Think Of A Situation Where This Is Not The Case?
Do You Always Use The Median Multiple Of A Set Of Public Company Comparables Or Precedent Transactions?
How Do You Take Into Account A Company's Competitive Advantage In A Valuation?