Comparable Analysis

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Comparable Analysis

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Comparable Analysis

  1. 1. Truth Behind Valuation<br />Comparable Companies Analysis of GM<br />
  2. 2. Why we <br />choose <br />this topic?<br />
  3. 3. Why we choose this topic?<br />Goal of Corporate Finance<br />Maximize Corporate Value While Managing the firm's financial risks<br />Interested in <br />the Present Tense<br /><ul><li> What is the value of one specific company
  4. 4. How to do valuation professionally</li></li></ul><li>After strenuously Gooooogling<br />
  5. 5. Methodologies of Valuation<br />Comparable companies analysis<br />Precedent transactions analysis<br />Discounted cash flow analysis<br />
  6. 6. Comparable Companies Analysis<br />Primary methodology <br />Given focus company, division business, or collection of assets<br />Broad range of applications, <br />M&A situations, IPOs, restructurings, and investment decisions.<br />
  7. 7. Comparable Companies Analysis<br />Premise<br />Pros and Cons<br />
  8. 8. Comparable Companies Analysis<br />Premise<br />Pros and Cons<br />
  9. 9. Premise<br />Similar companies provide a highly reference point <br />share key business and financial characteristics, performance drivers and risks.<br />
  10. 10. Comparable Companies Analysis<br />Premise<br />Pros and Cons<br />
  11. 11. Comparable Companies Analysis<br />Assumptions<br />Pros and Cons<br />
  12. 12. Pros and Cons<br />Pros<br />Market-based<br />Relativity<br />Quick and convenient<br />Current<br />Cons<br />Market-based<br />Periods of irrational exuberance or bearishness<br />Absence of relevant comparables<br />Potential disconnect from cash flow<br />Company-specific issues<br />
  13. 13. Target??<br />
  14. 14.
  15. 15. Valuation Steps<br />Step 1 -Select the universe of Comparable Companies <br />Step 2 -Locate the necessary financial information<br />Step 3 –Spread Key Statistics, Ratios, and Trading multiples<br />Step 4 –Benchmark the Comparable Companies<br /> & Determine Valuation<br />
  16. 16. Valuation Steps<br />Step 1 -Select the universe of Comparable Companies <br />Step 2 -Locate the necessary financial information<br />Step 3 –Spread Key Statistics, Ratios, and Trading multiples <br />Step 4 –Benchmark the Comparable Companies<br /> & Determine Valuation<br />
  17. 17. Selecting<br />…<br />
  18. 18. Valuation Steps<br />Step 1 -Select the universe of Comparable Companies <br />Step 2 -Locate the necessary financial information<br />Step 3 –Spread Key Statistics, Ratios, and Trading multiples<br />Step 4 –Benchmark the Comparable Companies<br /> & Determine Valuation<br />
  19. 19. Source of Data<br />SEC filings<br />Consensus research estimates<br />Equity research reports<br />Press releases<br />Financial information services<br />Source:<br />http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?dcn=0001193125-11-130473<br />http://www.moodys.com/credit-ratings/General-Motors-Corporation-Old-credit-rating-316500<br />http://www.standardandpoors.com/prot/ratings/entity-ratings/en/us/?entityID=1169842&sectorCode=CORP<br />
  20. 20. Valuation Steps<br />Step 1 -Select the universe of Comparable Companies <br />Step 2 -Locate the necessary financial information<br />Step 3 –Spread Key Statistics, Ratios, and Trading multiples<br />Step 4 –Benchmark the Comparable Companies<br /> & Determine Valuation<br />
  21. 21. Financial profile<br />Size (sales, gross profit, EBITDA, EBIT, and net income)<br />Profitability (gross profit, EBITDA, EBIT, and net income margins)<br />Growth Profile (historical and estimated growth rates)<br />Return on Investment (ROIC, ROE, ROA, and dividend yield)<br />Credit Profile (leverage ratios, coverage ratios, and credit ratings)<br />
  22. 22. Valuation Steps<br />Step 1 -Select the universe of Comparable Companies <br />Step 2 -Locate the necessary financial information<br />Step 3 –Spread Key Statistics, Ratios, and Trading multiples<br />Step 4 –Benchmark the Comparable Companies<br /> & Determine Valuation<br />
  23. 23. PresentTense<br />
  24. 24. After Deliberations…We’ve decided to Choose<br />
  25. 25. Market Valuation<br />Data collected <br />from recent) 10-K <br />and consensus report<br />
  26. 26. LTM Financial Statistics<br />All in millions<br />Data collected from recent 10-K(Annual Report)<br />
  27. 27. Sales and Cross Profit<br />
  28. 28. Sales and Cross Profit<br />
  29. 29. EBIDA, EBIT and Net Income<br />
  30. 30. LTM Profitability Margins<br />Data collected from recent 10-K(Annual Report)<br />
  31. 31. LTM Profitability Margins<br />
  32. 32. Growth Rates<br />Data collected from recent 10-K(Annual Report)<br />
  33. 33. Return on Investment<br />Data collected from recent 10-K(Annual Report)<br />
  34. 34. Return on Investment<br />GM is Here!<br />Data collected from recent 10-K(Annual Report)<br />
  35. 35. LTM Leverage Ratio<br />Data collected from recent 10-K(Annual Report)<br />
  36. 36. LTM Coverage Ratios<br />Data collected from recent 10-K(Annual Report)<br />
  37. 37. Credit Rating<br />
  38. 38. Determine Valuation<br />Companies in Auto sector tend to trade on the basis of forward EV/EBITDA multiples<br />Choose the closest comparables<br />Implied Valuation=<br /> Multiple Range* Metric (which is EBITDA)<br />
  39. 39. Trading Multiple<br />
  40. 40. GM’s <br />Implied Valuation is<br />All in millions<br />
  41. 41. Compared With <br />
  42. 42. GM’s <br />Implied Valuation is<br />All in millions<br />Enterprise Value From Yahoo! Finance is<br />25.74B<br />
  43. 43. Conclusion ?<br />
  44. 44. Interpretation of financials<br />Application of Trading multiples<br />
  45. 45. Group Members<br />Jiali Zhang<br />ZhiyangJia<br />WenjiaoGu<br />Shen Li<br />
  46. 46. Thanks <br />For <br />Your <br />Attention!<br />

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