Posted: 26 / 02 / 2018
How much is your company worth? How much should a business in each sector be selling for? Is now the right time to buy, sell or hold
For companies on the stock market, brokers need to know the best to times to buy, sell or hold stock.
When is the right time to buy competitors? When is the right time to exit? When should you bide your time and consolidate later?
One of the best ways to value a company is on a multiple of EBITDA. EBITDA can be used to analyse and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.
A multiple of EBITDA provides an enterprise value of the business, which is the value before debt is taken into account.Valuation multiples are the quickest way to value a company. They attempt to gain financial characteristics, such as expected growth in a single number. Multiplying this single number by EBITDA gives you an enterprise value.
Manufacturing Multiple between 5-11
The manufacturing sector is very complicated due to the dismal value of the pound. Whether you are using British or imported parts and are selling internationally or domestically will have a large effect on the attractiveness of your business.
‘Brexit uncertainty’ is a key phrase that doesn’t seem to be going away. If you are exporting products, then you are likely to do well as you’re gaining from currency. However, now is not a good time to import goods.
Experts say that growth in manufacturing is driven by technology whereas traditional labour-intensive manufacturing is less exciting. Tech-driven manufacturers are attracting very high prices, with multiples going into double figures.
Experts are unsure whether to buy or sell at this current time due to Brexit. Traditional labour-intensive manufacturing will have a multiple of 5-7 whereas tech-driven manufacturing tends to have a multiple of 10-11.
Retail Multiple between 10-12
Nowadays, only premium brands are pulling in the buyers and investors. For traditional retailers, experts believe the end is nigh, and cannot foresee a future for them. However premium brands are still attractive to oversee buyers, British quality can still mean something on the main stage.
Historically there has been no appetite for online retailers, particularly those who use platforms such as eBay. The view was that they need to change their business model, but now private equity firms are looking at them with more interest.
Experts suggest buying now as the retail market will continue to grow. Multiples for the retail industry are entering double figures.
Financial Technology Multiple around 10
Virtual currency is probably the biggest success story of the financial technology industry. It emerged in the aftermath of the financial aftermath and one of the most well-known types of virtual currency is Bitcoin.
Bitcoin has just exceeded $5,000, and all-time high. It rose by over 8% to $5,240 and is worth four times as much as an ounce of gold. However, when China pulled the plug on it, Bitcoin plummeted to below $3,000 in mid-September.
Experts have predicted that the technology behind cryptocurrencies will thrive, but the price of bitcoin will collapse.
Financial Technology has a high multiple of around 10 and is something worth buying.
Health Technology Multiple between 8-12
The health industry is enjoying great success with lots of med-tech companies expanding through international growth. There is great trade in this sector in which you could see a serious return in investment. Multiples in this sector are very good, usually round 8-12.
Recruitment Multiple between 6-8
In times of economic difficulties, isn’t the far off from being hit. Despite this, recruitment is still very buoyant. It is holding well, but experts advise people to sell as the multiples that go hand in hand with this industry aren’t too pleasing on the eye.