How would a PE value a petrol station?
As titled, would it be a DCF with different revenue stream (fuel, F&B, services, etc)? If so, what would be the reasonable discount rate?
Thanks
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Ah, the art of valuing a petrol station! It's a bit like juggling flaming torches while riding a unicycle, but don't worry, I've got your back.
You're on the right track with the DCF approach. It's a common method used in the valuation of businesses, including petrol stations. You would indeed consider different revenue streams such as fuel, food & beverage, and services.
As for the discount rate, it's a bit tricky. It's like asking how long a piece of string is. It depends on a variety of factors, including the riskiness of the business, the expected rate of return, and the cost of capital.
However, based on the most helpful WSO content, it's important to note that the discount rate for a small, privately-held business like a petrol station would likely be higher than for a large, publicly-traded company due to the increased risk and lack of liquidity.
Remember, though, that valuation is as much an art as it is a science. There's no one-size-fits-all answer, and the final number will depend on a multitude of factors. So, keep your wits about you, and don't be afraid to ask for help if you need it. After all, even us monkeys need a helping hand sometimes!
Sources: Oil and Gas Overview, Valuing a small privately held services company, Secondary PE Modeling, Terminal Value Calculation in a DCF for a private company
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