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This approach utilizes valuation multiples, such as price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, or enterprisevalue-to-EBITDA (EV/EBITDA) ratio, to estimate the value of the business. It provides insights into the market perception of similar businesses and helps establish a fair valuation.
Based on the company’s assets, liabilities, earnings, and growth potential, this calculation helps determine whether the stock is appropriately priced, overpriced, or undervalued. Share valuation in M&A offers a crucial starting point for discussions. Compare valuation ratios (e.g.,
Analysts use financial metrics and multiples such as Price to Earnings (P/E), Price to Book (P/B), EnterpriseValue to Sales (EV/Sales), EnterpriseValue to EBITDA (EV/EBITDA), and Price to Book (P/B) ratios derived from trading data of similar public companies or deal pricing data of similar M&A transactions.
Start with this exit checklist. Add-Backs or Adjustments “Add-Backs,” or Adjustments to Earnings, are additions to reported net income figures typically proposed by sellers for one-time expenses (e.g., EBITDA Multiple EBITDA Multiple refers to the multiple of EBITDA used to determine a company’s enterprisevalue.
This multiple is similar, by analogy, to the PER (Price to Earnings Ratio of listed companies). EnterpriseValue = Operating Value (x times EBIT or EBITDA). Assess financial debts Financial debts are made up of a long/medium-term part, corresponding to credits and loans taken out to finance investments.
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