Other, similar companies in the market have EV / EBITDA multiples between 11x and 13x. You calculate a company’s “Implied Value” – what it should be worth – based on what other, similar companies in the market are worth.įor example, Company A has an Enterprise Value of $1,000, with an EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization, a proxy for cash flow from operations) of $100 and, therefore, an EV / EBITDA of 10x. Valuation methodologies, such as Comparable Company Analysis (CCA), let you estimate a company’s intrinsic value or implied value, and how it differs from the company’s current market value. If it’s worth less than $50 per share, then it might be overvalued and worth avoiding. If the company is worth more than $50 per share, then it might be undervalued and worth investing in. What is Comparable Company Analysis (CCA)?Ĭomparable Company Analysis is an example of a valuation methodology you can use to value companies.įor example, if a company’s share price is currently $50, what is it truly worth? $50? $100? $25? Something else?
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