Trading Comps Analysis Different Currencies?
Hey Everyone,
In a trading comps model, how would you account for modeling companies that have their financial statements in different currencies (USD/EURO for example). I know in practice most trading comps models try to stay within one region such as the United States but what if its absolutely necessary to incorporate foreign competitors in the analysis. Do you convert the financial statements of one company to the currency of the others at the quoted currency pair value? This seems to be somewhat problematic especially if their is a lot of currency volatility.
Thanks,
Why does it matter? Using P/E as an example, (price in euros) / (net income in euros) gets you to the exact same answer as (price in dollars) / (net income in dollars). Projections should generally be kept in local currency where possible.
The bigger issue is that different countries have different accounting conventions so earnings in one country may not equal earnings in another country (ex: GAAP vs. IFRS)
Trading Comps with multiple currencies ? (Originally Posted: 04/28/2014)
Hi ! :) I need a small advice. When you are valuating a company and the comparables companies have currencies which are different from the one you want to evaluate, how do you do ? You keep the currency of your company or you keep the currency of each company ? Because i can't feed any filings which are in the same currency...
Thanks !
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