Valuation multiples across different industries - Similar scenarios for different industries?
When calculating multiples for comparable company analysis, which multiples are used specifically for certain industries and which are specifically not used for certain industries? I know that EBITDA isn't used for financial institutions because a large portion of their revenues comes from interest. Are there any similar scenarios for different industries? Thanks
EV/whatever operating metric can be seen as an "unlevered" basis for competition within companies in that industry -->
For instance, website valuation: EV/unique monthly visitors, page views, active members, etc.
Oil and gas: EV/available reserves, etc.
Healthcare: EV/total #beds, etc.
FIG looks at AUM, etc.
RE uses FFO (funds from operations).
Second what analystforhire mentioned above. The most typical metrics involve Enterprise Value to compare across industries. There are things like EV/Total Subscribers for a telecom company or EV/3P Reserves for oil&gas companies. Other than EV, there are almost always a few very niche numbers that are really only observed on an industry-by-industry basis. For example, in the regulated utility space you could look at $/mW or in the metals & mining space you could observe price per ___ (e.g. "ton of steel").
Also, if you were looking specifically into something like commercial banks... you mentioned that they don't trade off of EBITDA, which is generally true. I would venture a guess that you'd want to look at something like Price/Tangible Book Value in this environment.
great answers, thanks guys
Not just valuation multiples vary across industry, but also certain operating metrics matter more in certain industries than others.
For example, inventory turns is quite important in retail, MLR (medical loss ratio) is really important in health insurance.
Also, you should still use the other traditional multiples. For example, you could find that EV/EBITDA is the same, but that EV/# total beds is lower (so the business is making less EBITDA per bed, i.e. less efficient than competitors). So if you were a value-add shop or a strategic with better operating efficiency, you could say "hey, I'm going to buy that business, improve operations, and capture that additional value". Sometimes the difference in efficiency can be explained but sometimes it cannot (ideally, you have an explanation for it and a fix).
For mining,
EV/Proven + Probable, EV/Proven + Probable + M&I and then EV/PP + M&I + inferred - companies with larger amounts of reserves are in general going to trade at higher multiples than those with resources since they're going to be trading higher.
Cost per oz - self explanatory
Market cap/NAV - you'll see this a lot in the royalty space. Companies with larger portfolios of royalties will trade at a higher premium to the NAV of the royalty streams.
Where to find industry EBITDA multiples if I don't have access to Cap IQ? (Originally Posted: 01/24/2016)
Thanks!
manually on google/yahoo finance
Most commonly used valuation multiples (Originally Posted: 11/15/2008)
Where can I get a list of the most commonly used valuation multiples for a given industry?
The industries I am looking at -
FIG (banks, insurance) Tech (enterprise software, telecom, semiconductor, networking eqpmnt) B2C/B2B (mastercard, Visa, discover) Healthcare (HMOs, pharma) Retail (macys, sears, BB) Consumer products
Vix
FIG P/E and BV multiples Tech EBITDA and Rev multiples Healthcare; not sure but most likely EBITDA Retail EBITDA/EBITDAR Consumer EBITDA
Great post -- why is rent stripped out of EBITDA for Retail? isn't leasing expense a big part of having stores?
Yeah like airlines or any other industry that involves leasing, you use EBITDAR for comparibility, cuz you can't really compare EBITDA's if one leases and one doesn't.
e-business / e-commerce multiples (Originally Posted: 02/23/2011)
Hi guys,
Can somebody help me to an overview of multiples used in the past 2-5 years with regards to deals in the e-business segment? With e-business I refer to the e-commerce as well as segments as online payment, fulfillment, internet services etc.
I get stuck in trying to find out what multiples have been used in past deals.
Many thanks in advance!
also wondering
7
Industry Multiples (Originally Posted: 08/05/2011)
Hi,
I was hoping to get some help in finding industry multiples for a comps valuation. I'm not in the PE industry, but I'm doing it as a project (and it has to be as real as possible).
Any help would be much appreciated!
T
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/data.html
Down near the bottom there is a whole list of industry and sector multiples. Happy hunting!
Multiples (Originally Posted: 02/25/2011)
Where can I find some quick multiples on the market. Like how many times the market is trading x earnings. Or even a breakdown by industry? Thanks
morningstar.com,
Just pick a representative company from the industry and click the Valuation tab - you'll see a comparison of industry and market multiples
Thanks. SB if I could.
Where can I find avg/med leverage multiples for LBOs in consumer retail? (Originally Posted: 02/11/2012)
Where can I find avg/med leverage multiples for LBOs in consumer retail? Apparel retail specifically. Thanks
S&P LCD - assuming you have a login, they have monthly and quarterly presentations and cover various industries.
Churchill's On the Left articles shows weekly tables of LBO deals which takes info from LCD. I suppose you could also look at a bunch of their archived newsletters, gather the data and find the average that way.
I second Kanon - LCD has everything you need (but I believe you need not just an account, but a premium account to access that data, including the powerpoint presentations)
thanks guys
typical multiples for industry sectors (Originally Posted: 04/26/2011)
Hi everybody,
I am going into a telephone interview this week as I recently got the response from the HR department of Deutsche. I am wondering about the multiples: 1. What drives multiples to be high or low? High risk = low multiples? High growth outlook = high multiple? What else? I would think that technology would have high ones when they have a steep growth outlook for example.
Thank you!
Do a search, or buy one of the several guides that cover this.
List of multiples used to value companies in various industry (Originally Posted: 12/07/2013)
does anyone have a comprehensive list of what multiple drives what industry and why? for example retail is EV/EVITDAR because rent plays a big part of a retail company's expense...
Curious about this myself-
Multiples don't "drive" industries; they're just valuation metrics. Hopefully you're just phrasing your question poorly because you have a fundamental misunderstanding of the role multiples play otherwise.
For example, in retail, same-store sales growth and sales/sqft (along with EBITDA margin) are the key drivers of valuation.
mrb87 - sorry, should of phrased this question better. In my current job i'm focused on a specific industry and wanted to know what multiples would best reflect the underlying economics on a company.. going to change the title
Here: http://wallstreetplayboys.com/basic-guide-to-valuation-and-metrics-by-s…
still curious about which multiples for which industry (Originally Posted: 11/23/2008)
Please forgive me if this is overly simple, I am new to finance and had a quick question.
I have heard that certain multiples are more applicable to use when valuing companies in a certain industry. For example, for industry X, it is generally better to use EV/EBITDA rather than P/E.
Is it possible for someone to explain this concept a little? Which measurements are generally used for which industries, and why?
thanks in advance
Industries with a lot of CapEx hence DA and varying capital structures will tend to use EV/EBITDA to get an apples to apples comparison. Other industries with similar capital structures and relatively little CapEx i.e. banks will go with P/E multiples
A more common multiple used with banks would actually be price to book ratio rather than P/E.
Actually banks aren't getting valued on either these days. They are getting valued on if the market thinks they will be around next month or not since nobody knows what their real book value is or what their real earnings power is.
Quick question on multiples (Originally Posted: 10/07/2009)
My question is regarding EBITDAR and EBITDA - Capex.
I understand we use EBITDAR because rent can be a large expense in some industries and it can differ between companies. Therefore, we use EBITDAR to gain more comparability and a better gauge of the core profitability of the companies.
However, for industrial companies that are in capital-expenditure-heavy industries, we SUBTRACT Capex from EBITDA to get the correct multiple.
Why is that? Shouldn't we add back Capex to EBITDA (or just use EBITDA) for industrial companies because the level of capital expenditures between companies can differ and therefore not give us comparable multiples?
Bump. I'd like to add: Why would you ever subtract CapX from EBITDA, and why are we concerned with playing around with Capx in regards to EBITDA in the first place - how does that make a better multiple?
EBITDA - Capex is just a proxy for Cash Flow, so in industries that require substantial capex investment to drive revenue growth (EBITDA creation) it makes sense to look at this aspect of it as well. A way of equalizing for capital efficiency.
CapEx doesn't hit the income statement - it shows up as depreciation through time.
But - you need to make capital expenditures to keep the business going / keep it profitable.
Also, some companies choose to lease equipment, which is not capitalized, and that shows up on the income statement. Generally this is only smaller, private companies though.
You will use EBITDAR in companies that have sale and lease backs or large capital leases. In these companies, the R is really just a type of interest, its the way they have capitalized the company. So, you remove the R when its a capital structure issue not an operating issue.
EBITDA-Capex, as has been said is a cashflow multiple. This is important in companies like industrial companies where capex is very important as an earnings driver. That is, one company may be spending a ton of money on capex and thus earning a lot of money, another may be spending no capex dollars and earning less (but be better on a cashflow basis). D&A is supposed to be a proxy for maintenance capex, not for growth capex.
What are the multiples thare used in different industries? (Originally Posted: 09/26/2006)
For aerospace and defense?
For software?
wow
yes i'm clueless
thanks for pointing that out
P/CY06E EPS for commercial aero is running at around 18.4x vs. 15.7x for the defense space and 15.3x for the S&P. FV/CY06E EBITDA for commercial aero is running at around 10.3x vs. 8.7x for defense. Large aero acquisition multiples are at 9-15x FV/EBITDA, while defense edge them out at 10-16x.
Because of the long product cycle we also look at orders and build rates in anything involving planes/ships. Finally, remember there's the all-important government factor. For that we consider the projected defense budget and the expected size of various projects/platforms that are specific to each company. No small feat.
(You know how recruiters are always telling you how much you'll learn in this business? Well, this is the kind of shit you learn in this business.)
Pls. help. Thanks!
thanks for help
i have an interview coming up this weekend and i'm kind of stressed
Relax. Don't pretend to know anything you don't know. Don't be afraid of not knowing. Be friendly and teachable.
FV = Firm Value?
We call it Enterprise Value..
agreed, the danger is that either i) they're genuinely impressed and start to get deeper into a discussion around concepts/ valuation nuances or ii) they smell a rat and decide to test you. Outcome of both is that you'll quickly get out of your depth and lose any points you'd gained. Showing you've done research as you're interested in a particular area is a good thing, but a general knowledge is more impressive.
i blew the interview
i thought i would be asked more personality and fit questions but that only comprised maybe 5 minutes
the interviwer went right into technical aspects and i blanked out
i think my chances are shot
what company was it? and what round interview was it?
a good MM bank
first round interview on campus
they told me the 2nd round is tomorrow and that those chosen are invited to a dinner tonight
post up some questions that they asked while your memory is fresh
UMich, don't let this small incident discourage you. Now you're one experience richer. Build on this experience! It's not the end of the world!
One of my favorite banks has basically advised me not to bother applying for a full-time position as I didn't click with an interviewer when I interviewed for an internship position earlier this year. Yeah, I'm pretty down as this is ridiculous...
But you know what? Another bank thinks I'm good :-)
Moral: Never stop trying!
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