Income db aback Ev invested capital in other words any enterprise value multiple you can compute using the fundamentals and use the scaling trick you can use when you don’t mind enterprise value multiples here’s all you have to do wherever you’re talking about payout ratio retention ratio talk about reinvestment rate a – investment rate wherever you talk about growth replace girl do not express share with growth and operating income wherever you talk about cost of equity talk about cost of capital.
wherever you’re talking about return on equity talk about return on capital fact if you want to talk about margins with an enterprise value context talk about operating margins rather the net margins the same trick rm. different lens through which you look at the said at the numbers now that we’ve defined described analyze now we can apply and you have two questions you’re gonna ha veto deal with first is what are you comfortable folks now I know the lazy way of answering that is to say look.
If I know what sector my companies and Justus going to look at other companies in that sector but is actually a good measure of comparable Microsoft is a software company but is there any other software company in the world that’s even remotely similar to Microsoft from evaluation perspective a comparable-miss one with similar cash flows similar growth and similar risk nowhere in therein a receptor component now once you’ve got those companies together though that you call comparable remember no matter how careful you’ve been there be differences between your company and those companies and have to find creative ways are not so creative ways of controlling for those differences sole’s try a couple of examples i first looked at Disney relative to other entertainment companies again i can’t compare prices but i can compare multiples you.
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