what does it mean to "spread comps"

Ah, one of my favorite tasks

by dosk17 (Senior Gorilla, 851 Points) on 4/29/08 at 11:46pm

(just kidding)

Spreading comps in 6 easy steps:

1) Look up the company's filings (10-K and 10-Q) on Capital IQ.

2) Pull equity research on the company from whatever sources you use.

3) Enter the company's cash, debt, share count (and options table if you want to be precise to get the diluted count) from the latest filing.

4) Enter the company's trailing-twelve-months revenue and EBITDA (and probably more metrics depending on industry but let's just keep this general for now) by:

a) Entering revenue from latest 10-Q and 10-K and then subtracting revenue from 10-Q a year ago.

b) Entering EBITDA from latest 10-Q and 10-K and then subtracting EBITDA from 10-Q a year ago. To find EBITDA, start with Operating Income and add back the Depreciation & Amortization on the cash flow statement as well as any one-time charges... comb the footnotes of the filing for one-time and unusual charges like lawsuits, settlements, etc. and add them back. This is the fun part of the process.

5) Enter projections from equity research analyst... usually two years forward (so 2008 and 2009). Look up the revenue and EBITDA from report and enter them.

6) Make sure everything ties out and get your multiples... in this case, TEV/R and TEV/EBITDA.

Repeat the above for each company in the comp set... usually 5-10, but can be more depending on how sadistic the senior bankers are.

Have fun

http://www.mergersandinquisitions.com/
Mergers & Inquisitions

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How fast

by johnnyblue (Monkey, 56 Points) on 4/30/08 at 2:19am

Dosk, how quickly should a SA be able to complete the aforementioned for say 10 companies?

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dosk, why do you have to go

by numi (Gorilla, 540 Points) on 4/30/08 at 3:12am

dosk, why do you have to go through all of those steps? all the historical data you mentioned should already be in capital IQ and all you need to do is run a company screen. why do you need to manually enter that data?

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anyone have any tips for SAs

by waltersobchek (Gorilla, 580 Points) on 6/8/08 at 9:07pm

anyone have any tips for SAs when it comes to spreading comps? things to reduce errors, aside from the obvious attention to detail, and also finding those non-recurring charges?

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.

by giocatoredoro (Baboon, 171 Points) on 6/8/08 at 11:42pm

Our comps come just from the 10-k and 10-q, rarely do we look to thomson or capiq for comps. We 'personalize' the comps and make necessary "value-adding" by ajusting some numbers. Comps do take a while though. I agree with dosk, ACCURANCY FIRST.

It definetly helps to have accounting knowledge. But data-entry skills are probably more important (gasp)

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amortization is much like

by nystateofmind (Senior Gorilla, 886 Points) on 6/9/08 at 11:52am

amortization is much like depreciation, only for intangible assets

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highly unlikely

by joefish (Gorilla, 575 Points) on 6/9/08 at 12:30pm

SAs source coffee and if you're lucky, bagels

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