Hi Everyone,
I’m a student trying to practice valuation modeling for MM Targets and would like to become proficient in modeling for companies that either don’t have many public comparable companies, or companies that have public financials that date back pretty far (2009ish). What would be the correct way to go about valuing companies such as this? Appreciate any feedback.
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Forgot to include- I have access to a less capable version of CapIq (netadvantage)but a lot of the time the quick comps there aren’t very relevant
Comps will never be perfect. Get things that are close, I’ve seen outrageous comps that make no sense at first glance but when you dive in they are similar (ie consumer focused but selling completely different things).
As this is practice it won’t matter too much anyways. Roll with what you can find and get some reps. Good luck
I appreciate it. In cases where public financials are available from a long time ago, prior to a company going private or being acquired would you see these figures as useful in any way or they are too old to be relevant? Thanks for your insight!
It doesn't matter what date you are using, just pick a valuation date and pull all your data as of that valuation date. Make sure it's all of it, so comp data (size, growth, profitability, EV, whatever benchmarking data is relevant) is pulled as of the valuation, make sure the company you're valuing is pulling as of the valuation date, make sure all the data in WACC is pulled as of the valuation date (if comps are pulled correctly it should just be like ERP, bond rating, size premium, country premium (country from damodaran not sure where you can pull size premium from as I use Kroll but maybe if you look up "Duff and Phelps size premium FY09 PDF or something it will show up). Then when you're making an argument about CSRP try not to cheat and let what you know will happen color the premium.
& then comp selection is super high variance so just make a good argument. If you care about having a very strong argument start at a high level. ex: if target is a semiconductor, just screen semiconductor companies. And then go through each comp and look at, like, CapEx % of revenue benchmarking. If there is a group of companies w/ 30% capex % of revenue and a group of companies with <1% capex % of revenue probably you are looking at fabless semiconductor corps and semiconductor corps w/ fabs and you either need to exclude the group that is less like your target co or make some argument about sales or something so you're allowed to keep them but then reflect the risk that the comps are making multiples look wrong or something somewhere else in your valuation. That approach of high level -> weird stuff in % of revenue benchmarking analysis of comps is usually how we do it.
But again, if the exercise is to show you know how to "do valuation" you could be valuing a defunct corp as of 2/4/1986 and that would be totally fine if you can pull the data as of the val date.
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