Trading Comps Overview

Home

Forum

WST Self-Study Q&A

Package 4: Valuation Mod...

Complex Trading Comps An...

Trading Comps Overview...

Questions/Discussions

Sort by Date ▼ / Top Rated

Questions on calculating items for multiples (9 questions)

Multiples 1. For P/E, you only use net income from continued operations and income to common shareholders (excluding minority interest), correct? 2. Do you need to take out the EBITDA from discontinued operation from EV/EBITDA? usually EBITDA isn’t broken out that way and I don’t know if t... Multiples
1. For P/E, you only use net income from continued operations and income to common shareholders (excluding minority interest), correct?

2. Do you need to take out the EBITDA from discontinued operation from EV/EBITDA? usually EBITDA isn’t broken out that way and I don’t know if there is usually any disclosure on EBITDA from discontinued vs continued operation. Is that why you usually do not adjust EBITDA for discontinued operation?

3. When you take forward or historical P/E or EV/EBITDA, EV/revenue etc multiples from capiq, Bloomberg etc, are these already adjusted for you? (taking out minority interest and discontinued operation) or do you have to recalculate one by one?

4. Are you including MI in total debt because you are including these in TEV calculation? You exclude MI from total debt when you are calculating solvency and liquidity ratios right?

5. Adjustments for non-recurring items: these should have been captured in the company disclosures of their reconciliation from GAAP non GAAP numbers right? So less need to read through the footnotes to look through item by item?

6. If you are calculating FCF ratios eg EV/FCFF, how do you adjust for these non recurring items?

Diluted share calculation
7. Diluted share outstanding number is from WACSO or from financials, what if the number has changed since the release of the latest financials? Say the company has issued additional share and the number from Bloomberg or capiq is the latest share count since the release of the financials? Which number do you use to calculate equity value and to calculate diluted share? Does this change the exercisable share number stated on the financials to use to calculate the diluted share as well?

8. How do you calculate diluted share outstanding if you have different class of stocks (class A, B, C etc)? Are these all usually common stocks?

9. Currently exercisable options on the financials are those that can be exercised per that date in the financials (hence outdated). Do you need to update this to include any other potentially exercisable options at the time of you spreading the comps? (just by comparing current share price and exercise price)

Thank you so much for taking the time to respond to my questions! :) You have been a big help! Read More

Show All 1 Replies Login to Reply

by Elvina J.

added 6 years ago

Re: Questions on calculating items for multiples (9 questions)

1) Take Net Income from Continuing Operations AFTER Minority Interest, so INCLUDING the impact of MI. 2) No, EBITDA from Discontinued Operations is NOT in the "top half" of the Income Statement, it is lumped together in ONE line after NI. 3) In theory, the sell-side research analysts SHOULD be adj... Read More

by WST Expert 1.

added 6 years ago