Multiple Valuation Question
Ok so I have a question re: EV/EBITDA vs EV/Sales. I'm trying to value a hypothetical purse manufacturer and using KORS as a comp. My companies revenue is 22.7mm with 10.3mm ebitda for a 45.37% margin. KORS is 1.3bb revenue with 289.03mm ebitda for a 22.23% margin.
KORS EV/Sales = 6.43x --> $145.9mm value for my company
KORS EV/EBITDA = 28.96x --> $298.3mm value for my company
Since the EBITDA margins for the 2 companies are so drastically different, which is the more appropriate multiple to use in this situation? I'm leaning towards EV/EBITDA as it reflects each companies ability to produce income, but I was looking for some additional insight as the big difference seems strange to me. Thanks in advance for the help.
EBITDA (proxy for cash) is better than just sales in my opinion.
I mean EV/EBITDA is traditionally the best to use, but 29x EBITDA is extremely high. If you want to do your due diligence on this company than don't build a comp model using just one company. The results are bound to be skewed if you are basing your multiple on just one company, so get the multiples for a few companies in the industry and use their average as the multiple.
Is your company public or private? I am assuming private.. there is no way you will be able to justify a 29x ebitda multiple for your company. You need to adjust it down. Or, better yet, use a private company transaction as a comparable.
By the way, I would never use one public company for a comparable multiple.
Neer moar comps or just make up the valuation like a true banker
Sorry for the delay but thank you all for the insight. I was using multiple comps, I was just curious about the Sales vs EBITDA disparity.
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