Market approach

Similar to that utilized in valuing a house - namely look at what similar companies are valued at or have sold ...

Similar to that utilized in valuing a house - namely look at what similar companies are valued at or have sold for in the recent past.

Similar to that utilized in valuing a house - namely look at what similar companies are valued at or have sold for in the recent past.

The difficulty lies in identifying public companies that are sufficiently comparable to the subject company for this purpose.

Often, one can utilize a quick short-hand market approach via a revenue or earnings multiple comparison. A traditional shorthand in this regard is to say that small, private companies will, on average, sell for approximately 3 times (3x) trailing 12 months cash flow. Medium-sized and larger business tend to be valued at much higher multiples (Companies comprising the Dow Jones Industrial Average trade at a 14 x trailing twelve months multiple).

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