Noob question on DCF vs. Comps valuation
Noob question here:
I was speaking with a GP about a restaurant business which they own. The business had naturally been heavily impacted by COVID lockdowns so both revenue andhad decreased substantially over 2021. However, when I looked at the business, the very high.
basis, it looked like ~20x LTM EBITDA, where as most of its true comps historically trade around 6-8x. The GP mentioned that they are not using comps to form their FMV but rather feel the current holding value (FMV) is a better indicator of future value than the 'blip' the business is experiencing with COVID...
Now here is my confusion - the business' EBITDA had shrunk from ~$10mm to $2mm - how can the GP just not mark down the position? The current environment seems like a better indicator of value, even if it is a temporary set back, no?