Terms in this set (7)
What are the 3 most commonly used valuation techniques?
1.) Discounted Cash Flows
2.) Comparable companies multiples method
3.) Comparable transactions method
How would you value an oil and gas company?
1.) Price multiples such as EV/EBITDAX, EV/Proven Reserves, EV/Daily Production
2.) DCF using Net Asset Value
3.) Three methods used above
What is EBITDAX and why is it used?
EBITDAX is earnings before interest, tax, depreciation and amortization, and exploration expenses
Used because exploration expenses vary widely from firm to firm and it more accurate than EBITDA
Which of the following valuation techniques will give you the highest value? Lowest value?
Highest ---> Comparable Transactions Method because of strategic value and synergies & because they pay a premium to acquire the company
Lowest ---> Multiples Method
What are attributes of similar companies?
- Same industry
- Similar capital structure
- Same size
- Similar region/geography
- Similar cost structure
- Similar age (young company = growth)
What valuation technique is the most theoretically correct?
Discounted Cash Flow analysis; however, minute changes can have a drastic impact
What are some examples of intrinsic vs. relative valuation methods?
Intrinsic Valuation: DCF, DivDisc, Net Asset Value
Relative Valuation: Price multiples, Comparable transactions