When it comes to valuing a company, the comparables method is often used, especially for established businesses. It consists in determining the value of the company in relation to that of other similar businesses, in particular by considering their profitability.
The publicly available financial data of listed companies is used to compile sector statistics on valuation multiples, such as those presented in the document below.
In SME valuation, these multiples serve as a benchmark, but must be interpreted with caution. They are generally adjusted downwards to take account of differences in size, increased operational risk and the lower liquidity of SME shares compared with listed companies. The best comparison is to know the multiple at which a similar company recently sold.
