Comparable Transaction

AAA

DEFINITION of 'Comparable Transaction'

A method of valuing a company that is for sale. Comparable transactions considers the past sales of similar companies as well as the market value of publicly traded firms that have an equivalent business model to the company being valued. To get a more accurate valuation, more than one comparable transaction should be used. This method of valuation can help identify the current value and potential growth for a company.

INVESTOPEDIA EXPLAINS 'Comparable Transaction'

Comparable transactions look at multiples such as the EV/EBITDA ratio, among others, to determine a value. The difficulty with this approach is the limited availability of financial data regarding past transactions between private companies. A comparable transaction approach is generally used in conjunction with other valuation techniques including the discounted cash flow and other comparable company analysis techniques.

RELATED TERMS
  1. Ratio Analysis

    Quantitative analysis of information contained in a company’s ...
  2. Comparable Company Analysis - CCA

    A process used to evaluate the value of a company using the metrics ...
  3. EBITDA/EV Multiple

    A financial ratio that measures a company's return on investment. ...
  4. EBIT/EV Multiple

    A financial ratio used to measure a company's return on investment. ...
  5. Stock Analysis

    Stock analysis is a term that refers to the evaluation of a particular ...
  6. Enterprise Value - EV

    A measure of a company's value, often used as an alternative ...
Related Articles
  1. Valuing Firms Using Present Value Of ...
    Fundamental Analysis

    Valuing Firms Using Present Value Of ...

  2. Analyze Investments Quickly With Ratios
    Investing Basics

    Analyze Investments Quickly With Ratios

  3. Patents Are Assets, So Learn How To ...
    Investing Basics

    Patents Are Assets, So Learn How To ...

  4. Using The Price-To-Book Ratio To Evaluate ...
    Forex Education

    Using The Price-To-Book Ratio To Evaluate ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center