Comparable Companies Analysis (CCA) – Approach

Nadjas Notes

General

 Make notes to the cells (add page numbers from reports, etc.) for others to understand
 Look at accounting definitions etc. at Corporate Finance Institute

Market Cap

 Price of last close (yesterday)  can find it on the stock exchange’s website where they are
listed
 Market Cap  can find it on the company’s website (or the stock exchange’s website where
they are listed)
 Share count  today

Options

I include all outstanding shares in:

 executive share option plans
 performance share plans
 restricted share plan
as long as they are “in the money” regardless of their vesting date (as suggested in IFRS) & assume
that each company would repurchase their own shares with the option proceeds (treasury stock
method)
o when options are exercised, I assume that the company then buys back that exact
amount of shares from the market (the less shares outstanding, the more valuable) –
company basically uses every chance they would get to buy back shares

 Investors want to consider the dilution effects

 We assume for net diluted shares: that all shares are “vested” and then consider all the shares
that are “in the money” only (see how many that will be  look at the market price)
o In the money = when the market share price is over the exercise price
 Options  included in the annual financial statements (not in quarterly reports)
 We assume: each company applies the treasury option
 Other: things like convertible debt also have to be considered (look at Corporate Finance
Institute)
o Example: Rheinmetall used convertible debt to fund their acquisition of Expal

LTM Financials

Balance sheet
 Short term debt  check out CFI definition of what should be included (eg. everything current)
 Long term debt  “
 EBITDA  the adjusted EBITDA that the companies give in their annual reports is fudged and
not of use to us
o I calculate the EBITDA ourselves
o Attention: sometimes part of A&D is included in the COGS (eg. amortization of indirect
assets)
 Therefore important: go to the balance sheet notes & check:
 Fixed assets note, intangible assets note (break down) for full A&D
 Latest stub period = last quarterly accounts