Comparable Analysis
- 1. Truth Behind ValuationComparable Companies Analysis of GM
- 2. Why we choose this topic?
- 3. Why we choose this topic?Goal of Corporate FinanceMaximize Corporate Value While Managing the firm's financial risksInterested in the Present Tense What is the value of one specific company
- 4. How to do valuation professionallyAfter strenuously Gooooogling
- 5. Methodologies of ValuationComparable companies analysisPrecedent transactions analysisDiscounted cash flow analysis
- 6. Comparable Companies AnalysisPrimary methodology Given focus company, division business, or collection of assetsBroad range of applications, M&A situations, IPOs, restructurings, and investment decisions.
- 7. Comparable Companies AnalysisPremisePros and Cons
- 8. Comparable Companies AnalysisPremisePros and Cons
- 9. PremiseSimilar companies provide a highly reference point share key business and financial characteristics, performance drivers and risks.
- 10. Comparable Companies AnalysisPremisePros and Cons
- 11. Comparable Companies AnalysisAssumptionsPros and Cons
- 12. Pros and ConsProsMarket-basedRelativityQuick and convenientCurrentConsMarket-basedPeriods of irrational exuberance or bearishnessAbsence of relevant comparablesPotential disconnect from cash flowCompany-specific issues
- 13. Target??
- 15. Valuation StepsStep 1 -Select the universe of Comparable Companies Step 2 -Locate the necessary financial informationStep 3 –Spread Key Statistics, Ratios, and Trading multiplesStep 4 –Benchmark the Comparable Companies & Determine Valuation
- 16. Valuation StepsStep 1 -Select the universe of Comparable Companies Step 2 -Locate the necessary financial informationStep 3 –Spread Key Statistics, Ratios, and Trading multiples Step 4 –Benchmark the Comparable Companies & Determine Valuation
- 17. Selecting…
- 18. Valuation StepsStep 1 -Select the universe of Comparable Companies Step 2 -Locate the necessary financial informationStep 3 –Spread Key Statistics, Ratios, and Trading multiplesStep 4 –Benchmark the Comparable Companies & Determine Valuation
- 19. Source of DataSEC filingsConsensus research estimatesEquity research reportsPress releasesFinancial information servicesSource:http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?dcn=0001193125-11-130473http://www.moodys.com/credit-ratings/General-Motors-Corporation-Old-credit-rating-316500http://www.standardandpoors.com/prot/ratings/entity-ratings/en/us/?entityID=1169842§orCode=CORP
- 20. Valuation StepsStep 1 -Select the universe of Comparable Companies Step 2 -Locate the necessary financial informationStep 3 –Spread Key Statistics, Ratios, and Trading multiplesStep 4 –Benchmark the Comparable Companies & Determine Valuation
- 21. Financial profileSize (sales, gross profit, EBITDA, EBIT, and net income)Profitability (gross profit, EBITDA, EBIT, and net income margins)Growth Profile (historical and estimated growth rates)Return on Investment (ROIC, ROE, ROA, and dividend yield)Credit Profile (leverage ratios, coverage ratios, and credit ratings)
- 22. Valuation StepsStep 1 -Select the universe of Comparable Companies Step 2 -Locate the necessary financial informationStep 3 –Spread Key Statistics, Ratios, and Trading multiplesStep 4 –Benchmark the Comparable Companies & Determine Valuation
- 23. PresentTense
- 24. After Deliberations…We’ve decided to Choose
- 25. Market ValuationData collected from recent) 10-K and consensus report
- 26. LTM Financial StatisticsAll in millionsData collected from recent 10-K(Annual Report)
- 27. Sales and Cross Profit
- 28. Sales and Cross Profit
- 29. EBIDA, EBIT and Net Income
- 30. LTM Profitability MarginsData collected from recent 10-K(Annual Report)
- 32. Growth RatesData collected from recent 10-K(Annual Report)
- 33. Return on InvestmentData collected from recent 10-K(Annual Report)
- 34. Return on InvestmentGM is Here!Data collected from recent 10-K(Annual Report)
- 35. LTM Leverage RatioData collected from recent 10-K(Annual Report)
- 36. LTM Coverage RatiosData collected from recent 10-K(Annual Report)
- 37. Credit Rating
- 38. Determine ValuationCompanies in Auto sector tend to trade on the basis of forward EV/EBITDA multiplesChoose the closest comparablesImplied Valuation= Multiple Range* Metric (which is EBITDA)
- 39. Trading Multiple
- 40. GM’s Implied Valuation isAll in millions
- 41. Compared With
- 42. GM’s Implied Valuation isAll in millionsEnterprise Value From Yahoo! Finance is25.74B
- 43. Conclusion ?
- 44. Interpretation of financialsApplication of Trading multiples
- 46. Thanks For Your Attention!