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    Relative Valuation - Example PDF

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    PRITEE
    BWMC is an unlisted widget manufacturing company that reported Rs. 18 crore in EBITDA over the last four quarters. Other similar companies have an average EV/EBITDA ratio of 6.0. To estimate BWMC's equity value, its Enterprise Value is calculated as 6 times EBITDA of Rs. 108 crore, adjusted for Rs. 5 crore in cash and Rs. 30 crore in debt, resulting in an estimated equity value of Rs. 83 crore.

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    Relative Valuation - Example PDF

    Uploaded by

    PRITEE
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    BWMC is an unlisted widget manufacturing company that reported Rs. 18 crore in EBITDA over the last four quarters. Other similar companies have an average EV/EBITDA ratio of 6.0. To estimate BWMC's equity value, its Enterprise Value is calculated as 6 times EBITDA of Rs. 108 crore, adjusted for Rs. 5 crore in cash and Rs. 30 crore in debt, resulting in an estimated equity value of Rs. 83 crore.

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    BWMC is an unlisted widget manufacturing company that reported Rs. 18 crore in EBITDA over the last four quarters. Other similar companies have an average EV/EBITDA ratio of 6.0. To estimate BWMC's equity value, its Enterprise Value is calculated as 6 times EBITDA of Rs. 108 crore, adjusted for Rs. 5 crore in cash and Rs. 30 crore in debt, resulting in an estimated equity value of Rs. 83 crore.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    50 views1 page

    Relative Valuation - Example PDF

    Uploaded by

    PRITEE
    BWMC is an unlisted widget manufacturing company that reported Rs. 18 crore in EBITDA over the last four quarters. Other similar companies have an average EV/EBITDA ratio of 6.0. To estimate BWMC's equity value, its Enterprise Value is calculated as 6 times EBITDA of Rs. 108 crore, adjusted for Rs. 5 crore in cash and Rs. 30 crore in debt, resulting in an estimated equity value of Rs. 83 crore.

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    Example on Relative Valuation

    Best Widget Manufacturing Company (BWMC) is an unlisted company which reported a total EBITDA
    of Rs. 18 crores over the last four financial quarters. Stocks of other widget manufacturing companies are
    trading at an average EV/ EBITDA (TTM) ratio of 6.0. BWMC has debt of Rs 30 crore and surplus cash
    and cash equivalents of Rs 5 crore. Applying the EV/ EBITDA ratio of the other widget manufacturers,
    what is the equity value of BWMC?

    Solution

    EBITDA = Rs. 18 crores over the last four financial quarters.


    Stocks of other comparable companies are trading at an average EV/ EBITDA (TTM) of 6.0
    Enterprise Value of BWMC = (6 * Rs. 18 crore) = Rs. 108 crore
    Estimated Equity Value = Enterprise Value + Surplus Cash – Debt = Rs. (108 +5 – 30) crore = Rs. 83
    crore

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