A fair price for a specialty manufacturer
Trading comparables · 12 min · Fictional interview case
The situation
A client wants an initial valuation range before bringing in a buyer. Three businesses appear comparable, but the highest-multiple peer earns a larger share of revenue from a fast-growing product line. The client’s own results also contain a one-time gain.
Prepare a simple comparable-company estimate. Show the client which adjustments move the range and why the median is only a starting point.
- Peer enterprise value / EBITDA
- 7×, 8× and 12×
- Target reported EBITDA / one-off gain
- ₹34 crore / ₹4 crore
- Target net debt
- ₹42 crore
Your task
What share value does the median support? What range do the two lower peer multiples suggest?
Reveal step-by-step solution
Normalize target earnings
Remove the ₹4 crore gain. Normalized EBITDA is ₹30 crore.
Apply comparable multiples
The median is 8×. Implied operating value is ₹240 crore. The 7× and 8× peers imply ₹210–240 crore.
Subtract net debt
Median equity value is ₹198 crore. The lower-peer range is ₹168–198 crore. Check whether growth, margin and accounting differences justify excluding or retaining the highest peer.
Interviewer follow-up
Why not multiply net income by these multiples?
Compare your answer
The multiples use the value of the operations before financing claims. Match that value with an operating earnings measure such as EBITDA. Net income belongs with an equity multiple such as P/E.