How do I value a company with only knowing it's revenue, recurring revenue, ebitda, and a few facts about it's business model?
I was given a question by a recruiter this afternoon for a corporate finance internship at a large private SaaS company. I just received a rejection letter, and it's probably because I bombed this question. I know that revenue is $17M, recurring revenue is $7M, and ebitda is 30% of revenue. The company does data for fracking. How do I solve for this? I would like to know this for the future.
You should at least share how you answered this in the interview.
-deleted- use SOP (summed up below)
FYI - you would also get rejected for this answer. SOTP answer below would move on.
I would do a SOTP valuation.
7m recurring revenue
10m nonrecurring revenue
Assume that EBITDA margin is consistent (don't have to, but for simplicity's sake here, otherwise you'd do a weighted avg type thing to back into 30%).
7m x .3 = 2.1m
10m x .3 = 3m
Recurring revenue is valued at a higher multiple - say 10-12x. Non recurring revenue is valued at a lower one - say 3-5.
On the recurring business, that's 21m - 24.2m. On the non recurring business, that's 9m - 15m
So add those together and you get 30m to 39.2m
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