Valuation multiples used in healthcare, FIG and Public Sector groups

What valuation multiples are commonly used in healthcare, FIG and Publis Sector groups? I have interviews coming up and I had indicated these three as my industry groups of interest.

 
Best Response

depends which sector of healthcare.

Biotech companies typically aren't profitable so it's usually EV/Revenue, or some form of cash burn analysis (how much cash the company has remaining till it won't be able to operate, this is why you see biotech companies doing lots of equity related product offerings).

Healthcare services - some more specific metrics used depending if they are facility based or not, have a large rental expense etc are: EV/EBITDA - Rent or EV/EBITDA - Capex/Maintenance Capex. Also, for hospitals you can get into KPIs like Revenue/Bed, Revenue/Head.

Medtech and pharma are typical valuation metrics EV/EBITDA blah blah.

 

Multipliers generally affect how many years of cash flow your business is worth. For industries that have higher barriers to entry (such as healthcare), multipliers will generally be higher. For larger companies, multipliers are also higher.

Eg. for Electromedical equipment:

Multiplier of EBITDA is X 13.5

(Median Ann. Rev in the sample: $ 7,921 (in '000's) Median Sale Price $17,000 Low Sale Price: $1,208 High Sales Price: $740,000

Winners bring a bigger bag than you do. I have a degree in meritocracy.
 

Pharma - I work in Energy, but I did one of these a long time ago and i treated it as any other TMT. EV/EBITDA, EV/SALES, ROE, ROA - good for this analysis.

If the company has no current earnings use forward multiples for the comps and apply them to the similar earnings period for the target.

Fuel out of Algae - Straight forward DCF, the value driver will be the estimated selling price of the fuel.

The multiples for Energy (Power) are EV/Kw, or EV/(Mw/1000), note: the Mw should be name plate capacity, don't worry about actual generation. SOMETIMES, EV/EBITDA, but be careful you are not comparing projects on PPA and projects on merchant markets. FYI there are no (large) public pure play Solar or Wind generators in the US. The largest alternative energy generator in the USA is Next Era Energy, a part of FPL Group.

If it’s a green field - Construction Price/MW and (my fav) Construction Price/Actual Generation.

If you are going to do energy get SNL Energy, and maybe a Bloomberg, this is especially if you are going to value actually power projects with a DCF, b/c you will need forward power curves.

 
Preston:
not a joke. hospitals and long term care are measured by per bed and occupancy rates. The number of beds drives revenue because of the way insurance is billed per day etc

This makes sense for healthcare providers, but what about for 1. biotech/pharma, 2. hc insurance, and 3. HC IT.

Thanks.

 

The number of beds has little to do with value.  Most of them may not be occupied.  The national average for bed occupancy is probably less than 50% if you factor out the COVID impact.  To that extent, all you have is unneeded overhead with unused hospital wings costing massive amounts to maintain.

You go by what the market is paying for EBITDA or something that reflects reality for that institution. 

Obviously there are many other mitigating factors but beds lend little to the value.  You may convert them to other uses like nursing home/skilled care or something else but that's wishful thinking.

 
sryforbanking:
Large hospital operators, laboratories also use regular multiples (eg. EV/EBITDA, EV/Rev etc.).

Insurance companies (i.e. managed care) use EV/Members as well as MLR (medical loss ratio)= Medical expenses/net premium revenue

ev/members. now that's a funny one.

 

Different multiples for each of those so I don't think you could really compare them apples to apples. Don't have much experience with insurance but banks tend to trade on P/TBV and P/E

 

Healthcare generally looks at revenue multiple as much as ebitda - these biopharmas are nothing if they don't generate money and have cash. product pipelines/R&Ds burn through cash so they need a lot of financing. Biopharma, both generic and specialty, is very risky - high beta.

 

Id est id impedit ut aut et. Aut quisquam exercitationem nostrum qui dolorem. Non assumenda consequatur mollitia quae minus. Repellendus temporibus recusandae quod. Est dolores doloribus nobis provident aut aut. Odit totam quae eum recusandae dolorum.

Nam minima est numquam quidem nostrum deleniti et. Unde maiores et facilis est fugit voluptatibus esse. Quam saepe dolorum voluptatem et quas rerum vel. Perferendis aut temporibus quia optio dolor repellendus.

 

Quo animi corrupti quae asperiores et sunt dolor dolor. In sint dolorem sapiente est quam error enim. Quas vel ut eos blanditiis odit qui. Qui atque quaerat molestiae eaque amet laudantium. Et ut voluptas officiis voluptas neque in quam. Praesentium omnis recusandae necessitatibus quod velit eos. Excepturi quae nisi non nobis.

Ea sed necessitatibus consequatur est cumque iure cupiditate. Rerum fuga inventore error voluptatem quisquam reiciendis earum voluptas. Adipisci occaecati nulla quam aut aliquid similique. Explicabo sequi aut ex ipsam. Eveniet nulla et qui.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
DrApeman's picture
DrApeman
98.9
7
kanon's picture
kanon
98.9
8
CompBanker's picture
CompBanker
98.9
9
GameTheory's picture
GameTheory
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”