Question

12.5 P/E Valuing EJH Enterprises After researching the competitors of EJH Enterprises, you determine that most comparable firms have the following valuation ratios: Comp 1 Comp 2 Comp 3 Comp 4 EV/EBITDA 12 11 10 19 18 20 17 EJH Enterprises had EPS of $2, EBITDA of $300 million, $30 million in cash, $40 million in debt, and 100 million shares outstanding. What are the price estimates using both sets of multiples? EPS $2.00 EBITDA $300,000.00 Cash $30,000.00 Debt $40,000.00 Shares outstanding 100,000 Comp 1 Comp 2 Comp 3 Comp 4 EV/EBITDA P/E

Please show work via excel ( or any way that works)

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A 2 ЕЈH's $2.00 3 EPS $300,000,000 $30,000,000 $40,000,000 4 EBITDA Cash Debt Shares outstanding 100,000,000 8 Comp 1 Comp 2 Comp 3 Comp 4 EV/EBITDA 10 12.5 12 11 10 P/E 11 19 18 20 17 12 Per share price 13 14 15 Basis Comp 1 Comp 2 Comp 3 Comp 4 $35.90 $38.00 $32.90 $36.00 $29.90 $37.40 $40.00 EV/EBITDA 16 P/E $34.00 17 18 19 B.

Cell reference -

A ЕЈH's EPS EBITDA 300000000 Cash 30000000 6. Debt 40000000 Shares outstanding 100000000 9 Comp 1 Comp 2 Comp 3 Comp 4 EV/EBITDA 10 12 11 12.5 10 P/E 17 20 11 19 18 12 Per share price 13 14 15 Basis Comp 1 Comp 2 Comp 3 Comp 4 3(C10*$C$4-$C$6+$C$5)/$C$7 =(D10*$C$4-$C$6+$C$5)/$C$7 =(E10*$C$4-$C$6+$C$5)/$C$7 =(F10*$C$4-$C$6+$C$5)/$C$7 |=C11*$C$3 EV/EBITDA 16 =D11*$C$3 =E11*$C$3 |=F11*$C$3 P/E 17 18 19

Please note:

$\textup{Enterprise value (EV)} = \textup{Market capitalization + Debt - Cash}$

$\textup{Per share price} = \frac{\textup{Market capitalization}}{\textup{Share outstanding}}$

$\textup{P/E} = \frac{\textup{Price per share}}{\textup{EPS}}$

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.