IPO valuation

Topics: Discounted cash flow, Stock market, Fundamental analysis Pages: 4 (1836 words) Published: October 8, 2014
Q1: Comparable companies analysis is one of the major methodologies used for valuing a focus company. It provides a market benchmark against which analyst can analyze the value of a public company at a given point of time. The method of comparable is widely used in valuing IPOs, or recent IPO firms since accurate cash flow forecasts are often not available for those companies. The foundation for comparable companies is form on the premise that similar companies offer a highly relevant reference point for valuing a target company because of the fact that they are similar in key business and financial characteristics, performance drivers and risks. Hence, analyst can develop valuation parameters for the targeted company by determining its relative status among its peer companies. Therefore, the core of this analysis involves prudentially select a universe of comparable companies for the target company, which in our case study is Dick Smith Holdings (ASX: DSH). To identify companies with similar business and financial characteristics, it is necessary to have a well understanding of the DSH. DSH operates in the consumer electronic retail sector in Australia and New Zealand since 1970th, its core product focus emphasize on office, mobility product and entertainment. Business Profile

Financial Profile
Sector
Size
Products and Services
Credit Profile
Geography

Sector: refers to the industry or market in which a company operated. DSH is belong to the cyclical sector with sub-sector of ‘consumer electronics retail market’. Its revenue is greatly influenced by external factors, such as consumer sentiment, household disposable income, saving rate, etc. All nine potential comparable companies are subjected to the same industry sector, sharing the similar risks and opportunities. Products and Services: DSH’s products and services are focused on consumer electronics and peripheral services. All nine potential comparable companies are ether completely focus or...
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