Introduction
The comps table has been built, the summary statistics have been calculated, and the peer group's median NTM EV/EBITDA is 11.5x with an interquartile range of 9.8x to 13.2x. Now what? The final step in comparable company analysis is to apply those benchmark multiples to the target company's financial metrics, convert the result to an implied equity value per share, and place it on the football field chart.
Step 1: Multiply the Benchmark Multiple by the Target's Metric
The core calculation is straightforward:
Using the example above with a target company that has NTM EBITDA of $300 million:
- Low (25th percentile, 9.8x): $300M x 9.8x = $2.94 billion
- Midpoint (median, 11.5x): $300M x 11.5x = $3.45 billion
- High (75th percentile, 13.2x): $300M x 13.2x = $3.96 billion
The implied enterprise value range from trading comps is $2.94-3.96 billion.
Step 2: Bridge to Implied Equity Value
The implied enterprise value from Step 1 represents the value of the entire business. To convert to equity value, use the EV-to-equity bridge in reverse:
Using the midpoint example ($3.45 billion implied EV) and assuming the target has $500 million in total debt, $50 million in preferred equity, no minority interests, and $200 million in cash:
Step 3: Convert to Implied Equity Value Per Share
Divide the implied equity value by the target's diluted shares outstanding:
If the target has 150 million diluted shares:
Repeating for the low and high scenarios produces the full implied range:
| Scenario | Implied EV | Implied Equity Value | Implied Share Price |
|---|---|---|---|
| Low (25th pctile, 9.8x) | $2.94B | $2.59B | $17.27 |
| Midpoint (median, 11.5x) | $3.45B | $3.10B | $20.67 |
| High (75th pctile, 13.2x) | $3.96B | $3.61B | $24.07 |
- Implied Valuation
The estimated value of a target company derived by applying a benchmark multiple from the peer group to the target's corresponding financial metric. The term "implied" signals that the value is conditional on the peer group selected, the metric used, and the time period chosen. Implied valuations from different methodologies (comps, precedent transactions, DCF) are compared on the football field chart to identify convergence and divergence.
Placing the Result on the Football Field
The implied share price range ($17.27-24.07 in this example) becomes one bar on the football field chart. It is plotted alongside the ranges from precedent transactions, DCF analysis, LBO analysis, the 52-week trading range, and any other relevant reference points.
The comps bar typically sits below the precedent transactions bar (because precedent multiples include control premiums) and may sit above or below the DCF range depending on the assumptions used. Where the comps bar overlaps with other methodologies signals the zone of highest confidence.
Common Pitfalls
Several errors can invalidate the application step:
- Using the target's reported (unadjusted) EBITDA instead of normalized EBITDA when the peers' multiples are based on normalized figures
- Applying a multiple from a different time period than the target's metric (NTM multiple x LTM EBITDA)
- Using an outdated share count when calculating per-share value, particularly if the company has recently issued or repurchased shares
- Forgetting the bridge items: Applying the multiple to get implied EV but then presenting that number as equity value, omitting the debt/cash adjustment
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