Valuation

Valuation is one of my favorite chapters to teach, because it usually surprises folks how differently growth investors think about valuation. Even though valuation is a universal concept in corporate finance, it’s incredible how differently it can be applied! In these lessons, you’ll learn: Update for 2022/2023 market correction In 2022, there was a large …

Chapter kickoff Read More »

FAQ: How did I calculate exit value attributable to Growth, Multiple Compression, and Cash? These formulas are covered in the financial modeling section in greater detail, but here’s the summary: Note, in this case, we’re using “Revenue” as the valuation metric. If we were using EBITDA, replace Revenue with EBITDA in the above formulas. Also, …

4. Valuation framework – Growth vs. multiple compression Read More »

FAQ: What scenarios might lead to multiple expansion? We’ll discuss this in lots of detail throughout this Valuation section of the course. If you can’t wait and want a sneak peak, take a read of Bill Gurley’s article on 10x Revenue Club. It provides a solid foundation.

FAQ: Why do we use public comps to value a private business? Using public comps (comparable companies) to value a private business is a common approach in valuation because it provides a reliable benchmark by comparing the private business to similar public companies that are already traded in the stock market. This method is also …

8. Step #2 – Comps for entry multiple Read More »

FAQ: “Why not use entry multiples that are FURTHER into the future than the next twelve months (NTM)?” The main reason is that it’s really hard to predict what will happen in the distant future. Even experts find it challenging to forecast beyond a year, let alone five years or more. There’s a lot of …

7. Step #1 – Pick metric Read More »

FAQ: How do “traditional growth” and “venture-style growth” investors differ in their valuation approach? This is a great question. To discuss this, let’s divide the world of growth investors into two camps: In general, Traditional Growth investors place a greater emphasis on profitability, margins, and business model. They are likely to target businesses that are …

6. Valuation process Read More »