I'm interviewing with Goldman's currently, but not in M&A. I need to have a decent knowledge of valuation methods and know that Goldman's don;t really use the DCF. In this case what do they use to value companies? EV/EBITDA etc.?
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clarify your question
Goldman doesn't have an m&a team. And they most def do dcf valuations. I hope u know that valuation techniques depends on the type of deal. Not type of bank.
I hear Goldman MDs get a call from GOD in order to price deals so perfectly and accurately... Can some one please confirm?
^ confirmed. i heard it from an md when i worked there.
Yep. When Blankfein says he's doing God's work he's not exaggerating at all. The man upstairs actually does all the pricing -- with divine accuracy. The good folks at goldman just convert His will to excel and powerpoint, then execute.
lol good ones
The role is in equities and as part of the interview process i need to understand valuation techniques. My question really is, if you want to value a company for investment purposes (i.e. from the point of view of an equity investor) and aren't doing it with a DCF to arrive at a target share price, how else would you value the firm to assess it's investment potential against peers in the same sector?
lol, it's pretty hard to get an interview for GS M&A, even harder than getting an interview with Lehman these days.
looks like someone's gonna get dinged before he even walks in the door...
It's a good job the interview is in equities then, read my post.
I read your post
and you sound like an AUTO DING
but good luck though
and also, I bet they WILL ask you about a DCF, so I recommend you brush up on that, along with the comps
"Goldmans" is the Brit/Aussie/Honkie way of saying "Goldman Sachs" - only us yanks don't call it that
As far as I know, Goldman's doesn't really use DCF, you are right. The Goldman's use comparable company multiples, almost always, such as Price/Unlevered FCF and EV/EPS. EV/EBITDA is used from time to time, but it's outdated. Study up on those two multiples, how you derive it...think really hard.
Dude - this is genius...
Thanks for the help
When they want something valued, Chuck Norris says, this company is worth "$xxxx"
.............
And that company listens
I have a fairness opinion from GS on my desk that uses all 3 of the primary techniques: DCF, peer comps, and precedent transactions. Any true evaluation will include some derivation of a DCF (assuming you have access to historical data you can always build projections to derive a value of future cash flows). The major downside of DCFs, obviously, is its sensitivity to inputs and optimism.
You should buy Scoop Books Guide to IB, M&A Corp Fin before your interview otherwise I would say you are pretty F'd.
OP has it right, GS does NOT use DCF.
Those on the inside know that GS generally uses these to value assets:
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I think equities is one of goldman's IBD groups
BespokeAnalyst2010... dude.... you're an investment banking analyst so i presume you work in the IBD team, and you cannot even get your multiples correct. no one uses EV/EPS... that's like comparing apples to oranges. EV includes debt and EPS strips out debt so you cannot use one over the other. EV/EBITDA is fine as EBITDA is before the interest line.
and you're wrong... GS uses a range of valuation techniques and the 3 most common ones as highlighted by ppl here are dcf, comps and precedent transactions. you cannot rule out dcf use at GS... they may not favour it and not use it much but saying they dont really use it is like saying Morgan Stanley dont really use comps.
Hey Sheldon, having some problems detecting sarcasme?
Worst thread ever... OF COURSE GS uses DCF... you should slap whoever told you otherwise
I bet bankertohk registered on WSO exclusively for the sake of opening our eyes on screaming ignorance of BespokeAnalyst2010 in the field of multiples.
lol... no, it was not because of that. im not trying to be smart or arrogant myself, but annoys me when wanabe-bankers/existing bankers or alike make silly comments such as "goldmans dont really use dcf" or "ev/eps"
I hope you're kidding about EV/EPS...
bankertohk can't you see BespokeAnalyst2010 was joking?? A JOKE?
http://en.wiktionary.org/wiki/sarcasm
"Insincerely saying something which is the opposite of one's intended meaning, often to emphasize how unbelievable or unlikely it sounds if taken literally, thereby illustrating the obvious nature of one's intended meaning."
"im not trying to be smart myself" -> SUCCESS
This just got funnier.... Dude, you serious? Or is this a double bluff???? Did I miss it?
I was sure I would get this one.
too many ego's flying around this friday. too many "experts" out there.
With EV/EPS in the 8 billion range I think it is time for Google to do some reverse stock splits until it can comfortably fit its EV/EPS ratio on yahoo finance...I tend to screen out companies with EV/EPS in the 9 figure range +
EV/EPS doesn't even make any sense. EV represents the whole capital structure while EPS only equity holders. Unless you only have equity holders which I doubt.
So, getting back on topic, disregarding undergraduate/fresh analyst ego's, can anyone advise on valuation methods other than DCF which are relevant for valuing investment potential of public companies? If you were going to be interviewed about valuing companies what would you read up on apart from DCF?
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