Question

A company has revenues of $48 million and depreciation and amortization expenses of $8 million. Operating margin is 26%, net margin is 7% and gross margin is 57%. It has $24 million of debt, $7 million in cash, and 16 million shares outstanding. Comparable companies are trading at an average EV/EBITDA multiple of 19. How much are this company's shares worth using relative valuation

Answer 1

Answer:

$23.26

Explanation:

EBITDA = Revenue*Operating margin + Depreciation

EBITDA = $48*26% + $8

EBITDA = $12.48 + $8

EBITDA = $20.48

Share worth = (Worth - Debt + Cash) / Shares

Share worth = ($20.48*19 - $24 + $7) / 16

Share worth = ($389.12 - $24 + $7) / 16

Share worth = $372.12 / 16

Share worth = $23.2575

Share worth = $23.26