For cases where there are obvious and specific comparable public companies, (i.e. companies which provide a similar service, in a similar market), it may be beneficial to use a combination of those multiples, rather than a broad industry range.
For these cases, we offer an additional module for the Equidam platform which allows you to search an index of more than 30,000 public companies, selecting and combining the most relevant examples.
(Always double check the ticker, as the same company is sometimes quoted on different exchanges.)
The advanced multiples module also allows you to select a revenue multiple for your valuation, rather than an EBITDA multiple.
In general, we recommend EBITDA multiples over revenue multiples as they also account for the major operational expenses. This provides a more complete picture of financial performance when calculating your valuation.
In addition to specific industry considerations (e.g. banking, real estate) the main value of a revenue multiple is for companies that are not forecasting a positive EBITDA in the projected financial period. While we believe it's always good to show your path to profitability, in some cases this wont be possible on a short time horizon and here you can opt for a revenue multiple instead.
The problem with specificity
While advanced multiples can provide a more relevant comparison when calculating your valuation, the downside is that the specific risk of those companies is no longer averaged out. For example, if the revenue of a company were to collapse due to a fraud investigation or executive scandal, this would also be reflected in their multiple, and your valuation.
It is therefore worth considering the current market conditions for the companies you are looking at, and whether any major events have drastically shaped their financial performance, for better or worse.
Over time, the multiples of the public companies will adjust according to their financial performance and stock price. You will have the option to apply these updates to your valuation via the Advanced Multiples interface:
The source of Equidam's Advanced Multiples is public stock market data from global exchanges, and is updated on Sundays at 11:59 CET.