I’m currently calculating the EV EBITDA multiple for peer company analysis. One of the key item in calculating the enterprise value (EV) would be the market capitalization based on price of shares multiply by the number of outstanding shares.
If market capitalization is not available (as the company is not listed), are there any other proxy for the market capitalization in order to get EV? Can book value of common equity be a good proxy? Many thanks!
book value vastly differs. dont use private cos. its a peer analysis for publicly traded cos.
you can use median for publics to estimate private ev
Many thanks Nerdydrop!
I’m actually valuating a private company based in a country in Central West Asia. Quite hard to find a peer company within the country and industry. any
some additional questions:
just confirm, peers should be listed and not private companies ?
is it possible to check peers from other industry and other countries ?
Thank you
Calculate a justified EV / EBITDA
yep. use public to value private. try to make sure a lot of factors about them are the same. also keep in mind private cos usually trade a huge discount to publicly traded firms unless there is enough scale. which is why sometimes public firms use their cheaper financing to acquire cheaper multiple private firms.
other industries/countries have different multiples because of the level of risk. for example autos late cycle trade at very cheap multiples because they crash and burn hard when recessions hit due to level of debt combined with large decline of fundamentals. other countries trade at a discount to us as well due to their lack of stability, different accounting standards, or country’s exposure to a crap industry.
Another way to do it might be to take the average price to book of your public comps (let’s say it’s 1.5x) and then apply that multiple, possibly with an illiquidity discount, to the private peer you also have data for.