Understanding of trading multiples

Water Cooler Investing
#1

Hello guys, need a little help with understanding of trading multiples. Let’s consider three companies that operate in different industries, but at the same time have similar “subject” of their operations. 1. First company is engaged in selling bus tickets online (via internet platform) in Europe. 2. Second company produces passenger buses in Europe. 3. And the third company operates in transportation industry and organizes bus trips.

Will all these three companies in theory have the same trading multiples (EV / Sales, EV / EBITDA) because they ultimately serve the same industry (transportation, bus trips)? In my opinion no, cause they all have different profitability margins and nature of business operations (online ticket sell / production / transportation services). But I’m not sure whether I right or not. What your thoughts?

Thanks you in advance,

Best regards, Magnus

#2

-wrong thread

#3

My answer is no : multiples represent the appetite of investors for a dollar of sales/EBIT/EBITDA.

Many factors influence that appetite, such as volatility of said metric, its quality, the growth prospects of the company, etc.

These multiples work the same way as the P/E. The best firms have higher P/Es than other firms within the same industry.

#4

Oh and somehow I missed that : a company that produces buses has NOTHING to do with a company that sells tickets online, or some tour operator.