I understand that it wouldn't make sense to use a private company in your calc of cost of eq or wacc BC private companies don't have values for market cap or beta, but why couldn't you use private companies in public comps? Is it just because it's literally called "public" comps?
Thanks in advance
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If the company is private, how would you get their financial data? Even if you had it, you are probably under NDA not to disclose it. Sometimes, though, my group will use a slide to compare public multiples to those of a set of private companies that we have data for on a bar graph. We will name the public companies, but list the private ones as Private Company A, Private Company B, etc.
I guess you could if you had access to reliable financial information but usually it's hard to find quality data as there is no third party to verify authenticity. Public companies have consistent audited financials that are more transparent.
Pretty much agree with the comment above but if asked in an interview you can simply say "You cant find cash flows to discount or even financial statements for that matter."
Or shareholders of a private company put through expenses that private in nature. Recently I came across a private company that had art on its balance sheet; it makes you wonder what's going through the P&L, likely making the earnings unreliable for comparative purposes.
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