Valuing company using multiples

hi, some analyst at a hedge fund told me that they don't use DCF and only value companies using multiples. my question is how do you project the multiples for the next 3-5 years and how do you get upside/downside% and target price? the only thing I can think of is comparable company analysis from using multiples. And do you build a 3 statement model for this?

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hforbust2020

Monkey

HF

5y

bumpity bump bump

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Excelling

King Kong

PE

5y

Don't work in HF land, currently in PE, but my thoughts below:

Needing a full 3 statement model will always be dependent on how exact you are trying to be and what multiples you need (if you need P/E, then you need a much better model than if you are looking at EV/EBITDA)
I could see a world where they project forward the revenues/EBITDA for the next 3-5 years, see how the EV/EBITDA changes over time then put their own thought on what the company is worth to get a general sense of where the value may be in 3-5 years and if it's meaningfully different than the current consensus value
Every shop has a different investment thought process so you should talk to as many people as you can to see how they like to think about companies

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Authored by: Certified Private Equity Professional - Vice PresidentCertified Private Equity Pro

Ovechkin08

Senior Neanderthal

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Valuing company using multiples

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