Question on Discounting
If you are applying a multiple on TTM revenue would you discount this terminal value to the present value even though it is based on historical revenue figures?
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Could be wrong but I believe so. Yes the TTM multiple would probably change and probably not be the same as actual years go by for the company that is being valued. However, that's why sensitivity analysis is crucial. Because exit multiples will change over time, these are manipulated to see a range of possible EV's. Obviously there's other things that will be sensitized as well like perpetuity growth rates, WACC, and growth margins(sales, EBIT etc.). At the end of the day, implied EV from a DCF is not a specific value but rather a range of possible values.
Is this in the context of a DCF? If so, why would you use TTM revenue while you are building a forecast anyway?
It is in the context of a dcf where the person calculated terminal value through perpetuity growth method but then did a second method using a multiple on ttm revenue. I was wondering if this value would need to be discounted back as well
Yes ofc this would need to be discounted back. You're using TTM as a multiple, but that still represents the companies furutre earnings. i.e. a comapny's value is PV of future cash flow.
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