Question

ABC company wants to acquire XYZ. XYZ forecated the the follwoing:

	EV		Sales	EBITDA	EV/Sales	EV/EBITDA
Year	($M)		($M)	($M)	x	x
2018	$ 186,196,400		$98,600,000	$13,700,000	1.9	13.6
2019	$ 186,196,400		$112,200,000	$17,500,000	1.7	10.6
2020	$ 186,196,400		$150,100,000	$19,000,000	1.2	9.8

ABC Company wants to compare XYZ with its peers.

	EV/Sales	EV/EBITDA	Total Debt
Company	x	x	to EV
A	2.92	9.88	0.11
B	1.15	8.89	0.25
C	3.52	14.52	0.22
D	4.06	15.99	0.18
Average
Median

Is XYZ good to buy? If not which company is a better buy?

Answer 1

We see that both the EV/Sales and EV/Ebidta of XYZ is decreasing over time, indicating that the investors overvalued perception of the company is going down.

We see that company B has EV/Sales = 1.15 and EV/EBITDA = 8.89, both of which are more attractive than XYZ. Though its Debt/EV is a bit high, still it's good. Hence company B is a better buy.