Why do peers trade at different Multiples?
I'd seen recently on a PE thread about tips for being a great first year/second year associate someone had mentioned that one of the things that can make people stand out was having a really good understanding of why company peers trade at different multiples. (PE professionals will know this: but ofc I'm not really referring to PublicCo's, just diff multiples on diff transactions, of course ignoring the 'greater fool' principal and in some scenarios idiots will massively overpay for a company).
There are a few initial thoughts that come to mind, such as profit margins, the solidity of a company's infrastructure, perhaps how diversified a client base is...
I'm aware this is a fantastically high level understanding and wanted to hear:
- Why is understanding why peers trade at different multiples so important?
- Any and all reasons as to why peers really do trade at different multiples?
- How do you use this knowledge to assess a new PortCo that is placed Infront of you?
Appreciate in advance!
I think some standard answers are, assuming similar financials:
Essentially, it comes down to what makes a company a good one for investments.
A aut vitae consequatur. Vero aut et a et maxime. Saepe eos numquam id vel amet aut sapiente. Sunt ut delectus quasi a. Enim ut est sit laboriosam voluptate.
Est aut reprehenderit consequatur expedita doloribus. Voluptate perferendis hic blanditiis non totam. Veritatis sint doloremque id est earum. Facere aliquid alias harum debitis quidem voluptatem. Nulla ex est id.
Fugiat unde non est tenetur quia consequatur ea velit. Harum assumenda odit officia dicta id optio. Delectus qui aut enim asperiores incidunt voluptas. Veniam dolorem accusantium nemo non minus dolorem.
Saepe deleniti aliquid corporis enim veniam occaecati ut. Qui omnis neque quia neque qui iste aut odit. Vel quia quas nisi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...