Comparing a Dynamic Company
to Similar Firms on the Stock Market
is the Simple Approach to Valuation
to Similar Firms on the Stock Market
is the Simple Approach to Valuation
The valuation of a high growth business is a key concern for the owners of the enterprise as well as outsiders such as prospective investors. As an example, a corporate buyer that plans to acquire the high flyer has to figure out how much the business is worth. The same is true of a savvy investor who wants to buy a block of shares in a company listed on a stock exchange.
A simple way to gauge the value of a business is to compare it to similar firms in the equity market. The matchup against listed firms is directly relevant, for instance, in the case of a public offering of shares. However, the same analysis can serve as a point of reference in other settings. An example of the latter is a decision by the owners to sell the company, whether in whole or in part, by way of a private transaction.
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