Comparable Transaction
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 Definitions
Articles Of Interest
-
Using The Price-To-Book Ratio To Evaluate Companies
The P/B ratio can be an easy way to determine a company's value, but it isn't magic! -
Analyze Investments Quickly With Ratios
Make informed decisions about your investments with these easy equations. -
DCF Valuation: The Stock Market Sanity Check
Calculate whether the market is paying too much for a particular stock. -
Valuing Firms Using Present Value Of Free Cash Flows
When trying to evaluate a company, it always comes down to determining the value of the free cash flows and discounting them to today. -
Valuing Private Companies
You may be familiar with publicly-traded companies, but how much do you know about privately-held firms? -
How To Choose The Best Stock Valuation Method
Don't be overwhelmed by the many valuation techniques out there - knowing a few characteristics about a company will help you pick the best one. -
Top 3 Pitfalls Of Discounted Cash Flow Analysis
The DCF method can be difficult to apply to real-life valuations. Find out where it comes up short. -
8 Reasons M&A Deals Fall Through
Mergers and acquisitions can mean big success. But what about all the deals that fall through? -
Equity Valuation In Good Times And Bad
Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value. -
Patents Are Assets, So Learn How To Value Them
Innovation is the key to staying on top. Find out how companies protect their ideas and how to figure out how much they're worth.
Free Annual Reports