What valuation multiples are commonly used in healthcare, FIG and Publis Sector groups? I have interviews coming up and I had indicated these three as my industry groups of interest.
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P/B- price to book is used for FIG. Not sure about the other 2
depends which sector of healthcare.
Biotech companies typically aren't profitable so it's usually EV/Revenue, or some form of cash burn analysis (how much cash the company has remaining till it won't be able to operate, this is why you see biotech companies doing lots of equity related product offerings).
Healthcare services - some more specific metrics used depending if they are facility based or not, have a large rental expense etc are: EV/EBITDA - Rent or EV/EBITDA - Capex/Maintenance Capex. Also, for hospitals you can get into KPIs like Revenue/Bed, Revenue/Head.
Medtech and pharma are typical valuation metrics EV/EBITDA blah blah.
Thanks for the responses!
Industry standard multiples for Healthcare, Industrials and Consumer Products/Retail M&A groups (Originally Posted: 10/10/2013)
Could someone please shed light on what are the industry standard multiples for Healthcare, Industrials and Consumer Products/Retail M&A groups. I am looking for multiples used for DCF and other types of valuation. For each of them there are many different types of companies, so how would I go about giving the industry standard multiple? For example P/E. Could someone direct me to a good source for these industries? I will throw SBs at you if you'll contribute.
I am also wondering what are the best multiples to use for these M&A groups? 1. Healthcare 2. Industrials 3. Consumer Products/Retail
Multipliers generally affect how many years of cash flow your business is worth. For industries that have higher barriers to entry (such as healthcare), multipliers will generally be higher. For larger companies, multipliers are also higher.
Eg. for Electromedical equipment:
Multiplier of EBITDA is X 13.5
(Median Ann. Rev in the sample: $ 7,921 (in '000's) Median Sale Price $17,000 Low Sale Price: $1,208 High Sales Price: $740,000
Thank you guys! That's really helpful!
Valuation Multiples for Healthcare & Clean Energy Companies (Originally Posted: 08/26/2009)
Hi all,
I have tried to do some research on this online but most of the stuff is pretty old.
What are the most important multiples when valuing: pharmaceutical companies, companies providing patient-physican communication management and other outsourcing solutions like billing etc, companies making technologies for endoscopic surgeries or other diagnostic instruments. I am assuming that the pharmaceutical companies are for the most part profitable, so do you just use the usual EV/Sales, EV/EBIT/ EV/EBITDA sort of multiples. What about companies with maybe negative earnings but high prospects of future growth. What are the differences when looking at public vs private healthcare companies?
I am also looking for some info on valuing Clean Energy companies. Say those making fuel out of algae, or energy plants powered by wind or solar energy. These will be companies that have not yet attained profitability.
It will be great if you guys can share your insights on this, or perhaps give me some links that discuss this. If you are feeling generous, I will also appreciate someone with access to FactSet/CapIQ giving me averages for the important multiples used for valuing healthcare and energy companies.
Thanks a lot!
are EV/EBIT, EV/EBITDA, EV/SALES, ROE, ROA good multiples for building a comp for valuing a small & profitable pharmaceutical company
Pharma - I work in Energy, but I did one of these a long time ago and i treated it as any other TMT. EV/EBITDA, EV/SALES, ROE, ROA - good for this analysis.
If the company has no current earnings use forward multiples for the comps and apply them to the similar earnings period for the target.
Fuel out of Algae - Straight forward DCF, the value driver will be the estimated selling price of the fuel.
The multiples for Energy (Power) are EV/Kw, or EV/(Mw/1000), note: the Mw should be name plate capacity, don't worry about actual generation. SOMETIMES, EV/EBITDA, but be careful you are not comparing projects on PPA and projects on merchant markets. FYI there are no (large) public pure play Solar or Wind generators in the US. The largest alternative energy generator in the USA is Next Era Energy, a part of FPL Group.
If it’s a green field - Construction Price/MW and (my fav) Construction Price/Actual Generation.
If you are going to do energy get SNL Energy, and maybe a Bloomberg, this is especially if you are going to value actually power projects with a DCF, b/c you will need forward power curves.
healthcare multiples (Originally Posted: 01/26/2011)
Hi Guys, Do you know if healthcare has any specific multiples? Like a startup with no revenue yet would use EV/Pageviews as a relevent metric ..but any specific to healthcare??
I appreciate it!
What type of healthcare company?
like hosital or biomedical engineering or large lab medical equipment company.
anything healthcare
ev/beds
is that a joke? I'm seriously asking, EV/Beds sounds real funny...lol
not a joke. hospitals and long term care are measured by per bed and occupancy rates. The number of beds drives revenue because of the way insurance is billed per day etc
This makes sense for healthcare providers, but what about for 1. biotech/pharma, 2. hc insurance, and 3. HC IT.
Thanks.
The number of beds has little to do with value. Most of them may not be occupied. The national average for bed occupancy is probably less than 50% if you factor out the COVID impact. To that extent, all you have is unneeded overhead with unused hospital wings costing massive amounts to maintain.
You go by what the market is paying for EBITDA or something that reflects reality for that institution.
Obviously there are many other mitigating factors but beds lend little to the value. You may convert them to other uses like nursing home/skilled care or something else but that's wishful thinking.
thanks guys, I really appreciate it
biotech/hc it, very similar to overall tech space hc insurance --> insurance (look at FIG)
Large hospital operators, laboratories also use regular multiples (eg. EV/EBITDA, EV/Rev etc.).
Insurance companies (i.e. managed care) use EV/Members as well as MLR (medical loss ratio)= Medical expenses/net premium revenue
ev/members. now that's a funny one.
Biotech is nothing like TMT. Please elaborate if you think so.
FIG Multiples - What Trades Higher? (Originally Posted: 10/07/2015)
What would trade higher, a Community Bank or Insurance Company? How about PC vs. Life Insurance?
Different multiples for each of those so I don't think you could really compare them apples to apples. Don't have much experience with insurance but banks tend to trade on P/TBV and P/E
Healthcare Multiples - Big Pharma / Generics (Originally Posted: 10/01/2012)
Can anyone fill me in on multiples used when valuing or looking at a pharma's financials?
Any key multiples?
Key things to look out for?
And key differences between generics and big pharmas (in terms of multiples looked at, differences in financials)?
Would greatly appreciate any help!
Healthcare generally looks at revenue multiple as much as ebitda - these biopharmas are nothing if they don't generate money and have cash. product pipelines/R&Ds burn through cash so they need a lot of financing. Biopharma, both generic and specialty, is very risky - high beta.
From a strategic acquisition stand-point, it is less about the amount of sales/ebitda and more about the cash flows generated from your pipeline. I'm talking from a generic/specialty perspective - since once a product (drug) becomes genericized the company's earnings can be instantly affected.
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