Trading Comps Modelling Exam 2024
B
Steps to Trading Comp Analysis - ANSWER 1. Determine set of comparable
LU
companies
2. Calculate equity and enterprise values
YC
3. Analyze historical and projected earnings
D
4. Derive valuation multiples, credit stats, and operating metrics
TU
5. Check output for accuracy
Treasury Stock Method - ANSWER Net new shares =[ (market or share price -
ES
exercise price) x (# of options)] / market price
Value per share = (market price - exercise price)
C
A
Total value of all options = (market price - stock price) x (# of options)
New shares from conversion - ANSWER total amt of bond debt
-------------------------
Conversion Price
, Net Debt components (debt) - ANSWER • Short term borrowings
• Notes payable
• Commercial paper
• Bank overdrafts
• Revolving credit facility
• Capital / finance leases
• Loans
B
• Corporate bonds
LU
• Long term debt
• Bank loans
YC
all interest bearing so treated as debt
Net Debt components (cash) - ANSWER • Cash
D
• Cash equivalents
• Marketable securities
TU
• Short term investments
Commercial paper - ANSWER Short-term debt, typically 9 months of debt used to
ES
finance Working capital needs
Pre-interest earning measures - ANSWER Enterprise value go with Revenue, EBIDA,
C
and EBIT
A
EV = value to both debt & equity holders, so an earnings figure available to everyone as
well must be used
revenue, EBITDA, and EBITare all pre-interest
B
Steps to Trading Comp Analysis - ANSWER 1. Determine set of comparable
LU
companies
2. Calculate equity and enterprise values
YC
3. Analyze historical and projected earnings
D
4. Derive valuation multiples, credit stats, and operating metrics
TU
5. Check output for accuracy
Treasury Stock Method - ANSWER Net new shares =[ (market or share price -
ES
exercise price) x (# of options)] / market price
Value per share = (market price - exercise price)
C
A
Total value of all options = (market price - stock price) x (# of options)
New shares from conversion - ANSWER total amt of bond debt
-------------------------
Conversion Price
, Net Debt components (debt) - ANSWER • Short term borrowings
• Notes payable
• Commercial paper
• Bank overdrafts
• Revolving credit facility
• Capital / finance leases
• Loans
B
• Corporate bonds
LU
• Long term debt
• Bank loans
YC
all interest bearing so treated as debt
Net Debt components (cash) - ANSWER • Cash
D
• Cash equivalents
• Marketable securities
TU
• Short term investments
Commercial paper - ANSWER Short-term debt, typically 9 months of debt used to
ES
finance Working capital needs
Pre-interest earning measures - ANSWER Enterprise value go with Revenue, EBIDA,
C
and EBIT
A
EV = value to both debt & equity holders, so an earnings figure available to everyone as
well must be used
revenue, EBITDA, and EBITare all pre-interest
