Introduction
Valuing a public company requires a structured approach to ensure accuracy and reliability. Using Valutico’s platform, analysts can conduct valuations leveraging market data and financial models. Below is a step-by-step guide and a quality checklist for conducting effective public company valuations.
Initiating the Valuation on Valutico’s Platform
To begin, navigate to the Public Markets section on Valutico’s platform and create a new public company valuation. This section provides essential market data and valuation tools to ensure a robust analysis.
Quality Checklist for Weekly Valuations
1. Data and Method Selection
Select appropriate data sources and valuation methods.
Exclude Leveraged Buyout (LBO) models and transaction multiples, as they are not applicable to public companies.
Ensure related transactions are removed from the dataset.
Prioritize Discounted Cash Flow (DCF) methods, especially the DCF WACC Simplified approach, which aligns well with trading multiples.
2. Financial Forecasts and Statements
Conduct a thorough review of financial forecasts and income statements.
Pay close attention to analyst-provided forecasts, which are typically highlighted in blue figures on Valutico’s platform.
If analyst forecasts for later years are unavailable, consider shortening the valuation timeframe to maintain reliability.
3. Terminal Year Growth and Margins
Carefully determine the Terminal Year growth rate and margins to ensure consistency and accuracy.
Set the Terminal Year growth rate at 2% to align with long-term economic growth expectations.
Ensure that Terminal Year margins align with the last forecasted year to maintain a smooth financial projection.
4. Valuation Preferences and Adjustments
Opt for Equity Value (EqV) rather than alternative valuation measures for public companies.
Remove any discounts from peer multiples to maintain comparability.
Use the company’s specific beta and Debt/Capital (D/C) ratio instead of relying on peer group calculations. This can be manually adjusted in the peer group section of Valutico.
Eliminate any Cost of Equity premium, as this is typically not applicable for publicly traded firms.
Address and adjust for any platform-related bugs when using Equity Value calculations to avoid discrepancies.
Conclusion
By following this structured approach and adhering to the quality checklist, analysts can produce consistent, accurate, and reliable public company valuations. Valutico’s platform provides powerful tools to streamline this process, ensuring that valuation analyses align with best practices in financial modeling and market analysis.