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skills/eddiebe147/claude-settings/Valuation Analyst

Valuation Analyst

SKILL.md

Valuation Analyst

Expert valuation agent that determines fair value of companies and assets using multiple methodologies. Specializes in DCF analysis, comparable company analysis, precedent transactions, and asset-based valuation. Provides comprehensive valuation for investment decisions, M&A, and strategic planning.

This skill applies rigorous valuation frameworks used by investment banks, private equity firms, and corporate finance professionals. Perfect for startup valuations, M&A analysis, investment decisions, and fairness opinions.

Core Workflows

Workflow 1: Discounted Cash Flow (DCF) Valuation

Objective: Value company based on projected future cash flows

Steps:

  1. Financial Projections (5-10 years)

    • Revenue Projections:

      • Historical growth analysis
      • Market size and share
      • Segment-level forecasts
      • Growth rate deceleration

    • Profitability Projections:

      • Gross margin trends
      • Operating margin expansion
      • SG&A leverage
      • Target margins at maturity

    • Capital Requirements:

      • CapEx as % of revenue
      • Working capital changes
      • D&A schedule

  2. Free Cash Flow Calculation

    EBIT (Earnings Before Interest & Taxes)
- Taxes (EBIT × Tax Rate)
= NOPAT (Net Operating Profit After Tax)
+ Depreciation & Amortization
- Capital Expenditures
- Change in Working Capital
= Unlevered Free Cash Flow (UFCF)

  3. Discount Rate (WACC)

    • Cost of Equity (CAPM):

      Ke = Rf + β × (Rm - Rf)

Where:
Rf = Risk-free rate (10-year Treasury)
β = Levered beta
Rm - Rf = Equity risk premium (5-7%)

For private companies, add size premium (2-6%)

    • Cost of Debt:

      Kd = Interest Rate × (1 - Tax Rate)

    • WACC Calculation:

      WACC = (E/V × Ke) + (D/V × Kd)

E = Market value of equity
D = Market value of debt
V = E + D

  4. Terminal Value

    • Perpetuity Growth Method:

      TV = FCF(final year) × (1 + g) / (WACC - g)

g = Terminal growth rate (typically 2-3%)

    • Exit Multiple Method:

      TV = EBITDA(final year) × Exit Multiple

Exit multiple based on comparables

  5. Enterprise Value Calculation

    Enterprise Value = Σ(FCF / (1 + WACC)^t) + TV / (1 + WACC)^n

t = year number
n = final projection year

  6. Equity Value Bridge

    Enterprise Value
- Total Debt
- Preferred Stock
- Minority Interest
+ Cash & Equivalents
+ Non-operating Assets
= Equity Value

Per Share Value = Equity Value / Diluted Shares

  7. Sensitivity Analysis

    • WACC vs Terminal Growth matrix
    • Revenue growth sensitivity
    • Margin sensitivity
    • Multiple sensitivity

Deliverable: DCF valuation with sensitivity tables

Workflow 2: Comparable Company Analysis

Objective: Value company using trading multiples of similar public companies

Steps:

  1. Select Comparable Companies

    • Same industry/sector
    • Similar business model
    • Comparable size (revenue, market cap)
    • Similar growth profile
    • Geographic relevance
    • Minimum 5-7 comps preferred

  2. Gather Market Data

    • Stock price (current)
    • Shares outstanding (diluted)
    • Market capitalization
    • Total debt
    • Cash and equivalents
    • Minority interest

  3. Calculate Enterprise Value

    Market Cap = Share Price × Diluted Shares

Enterprise Value = Market Cap + Debt - Cash + Minority Interest

  4. Gather Financial Metrics

    • LTM (Last Twelve Months):

      • Revenue
      • EBITDA
      • EBIT
      • Net Income
      • EPS

    • NTM (Next Twelve Months) estimates:

      • Revenue
      • EBITDA
      • EPS

  5. Calculate Trading Multiples

    Multiple Formula When to Use
    EV/Revenue EV / Revenue High growth, negative EBITDA
    EV/EBITDA EV / EBITDA Most common, capital intensive
    EV/EBIT EV / EBIT D&A differs materially
    P/E Price / EPS Mature, profitable
    P/B Price / Book Financial institutions
    PEG P/E / Growth Growth-adjusted comparison

  6. Analyze and Select Multiples

    • Calculate mean, median, range
    • Identify outliers
    • Consider premium/discount factors
    • Select appropriate multiple range

  7. Apply to Target Company

    Enterprise Value = Target Metric × Selected Multiple

Example:
Target EBITDA = $50M
Median EV/EBITDA = 12.0x
Implied EV = $600M

  8. Valuation Range

    • Low (25th percentile multiple)
    • Mid (median multiple)
    • High (75th percentile multiple)

Deliverable: Comparable company analysis with valuation range

Workflow 3: Precedent Transaction Analysis

Objective: Value company using M&A transaction multiples

Steps:

  1. Identify Relevant Transactions

    • Same industry
    • Similar deal size
    • Recent (last 3-5 years)
    • Similar deal structure
    • Minimum 5-7 transactions

  2. Gather Transaction Details

    • Announcement date
    • Acquirer and target
    • Deal value
    • Deal structure (stock/cash)
    • Strategic vs financial buyer
    • Control premium paid

  3. Calculate Transaction Multiples

    • EV/Revenue at time of deal
    • EV/EBITDA at time of deal
    • EV/EBIT at time of deal
    • Premium to trading price

  4. Adjust for Context

    • Market conditions at time of deal
    • Synergy expectations
    • Competitive bidding situation
    • Distressed vs strategic deals

  5. Apply to Target

    Transaction EV = Target Metric × Transaction Multiple

  6. Consider Control Premium

    • Typical premium: 20-40% over trading
    • Adjust for minority vs control stakes
    • Strategic vs financial buyers

Deliverable: Precedent transaction analysis with implied value range

Workflow 4: Startup/Private Company Valuation

Objective: Value early-stage or private company

Steps:

  1. Valuation Method Selection

    Stage Primary Methods
    Pre-revenue Scorecard, Berkus, Risk Factor
    Early revenue Revenue multiples, DCF (if possible)
    Growth stage Revenue multiples, DCF
    Late stage DCF, comps, precedent transactions

  2. Revenue Multiple Approach

    • Select Comparable Multiples:

      • Public SaaS: 5-15x revenue
      • Marketplace: 1-5x GMV, 5-15x revenue
      • E-commerce: 0.5-2x revenue

    • Apply Discount:

      • Illiquidity discount: 20-35%
      • Size discount: 10-30%
      • Stage discount: varies

    • Calculation:

      Value = Revenue × Multiple × (1 - Discounts)

  3. Venture Capital Method

    Exit Value = Projected Revenue × Exit Multiple
Pre-money Value = Exit Value / Target Return

Example:
Year 5 Revenue = $100M
Exit Multiple = 6x
Exit Value = $600M
Target Return = 10x
Current Value = $60M

  4. Scorecard Method (Pre-revenue)

    • Average pre-money for stage/region
    • Score on factors (±50%):
      • Team strength
      • Market opportunity
      • Product/technology
      • Competitive environment
      • Partnerships
      • Need for financing
    • Multiply base by weighted factors

  5. Cap Table Implications

    • Pre-money vs post-money
    • Dilution calculation
    • Option pool sizing
    • Liquidation preferences

Deliverable: Private company valuation with methodology explanation

Workflow 5: Sum-of-the-Parts (SOTP) Valuation

Objective: Value multi-segment company by valuing each segment separately

Steps:

  1. Segment Identification

    • Business segments from filings
    • Geographic segments
    • Product line segments
    • Operational vs non-operating assets

  2. Segment Financial Separation

    • Segment revenue
    • Segment EBITDA
    • Segment assets
    • Corporate overhead allocation

  3. Segment Valuation

    • Value each segment using appropriate method:
      • Growth segment: Revenue multiple or DCF
      • Mature segment: EBITDA multiple
      • Asset-heavy: Asset-based
    • Use segment-specific comparables

  4. Corporate Adjustments

    • Corporate overhead (capitalize as liability)
    • Shared services
    • Intercompany eliminations
    • Net debt allocation

  5. Sum of Parts

    Segment A Value: $X
+ Segment B Value: $Y
+ Segment C Value: $Z
- Corporate Overhead Value: ($W)
- Net Debt: ($D)
= Total Equity Value

  6. Conglomerate Discount

    • Typical discount: 10-25%
    • Reasons: complexity, capital allocation
    • Consider break-up value

Deliverable: SOTP valuation with segment breakdown

Quick Reference

Action Command/Trigger
DCF valuation "Perform DCF analysis"
Comparables "Value using comparable companies"
Transactions "Analyze precedent transactions"
Startup value "Value this startup"
SOTP "Sum-of-the-parts valuation"
Full analysis "Complete valuation analysis"

Valuation Multiples Reference

By Industry (EV/EBITDA Ranges)

Industry Range Notes
Software/SaaS 15-30x Revenue multiples also common
Healthcare 10-15x Varies by sub-sector
Consumer Retail 6-10x Location matters
Manufacturing 6-10x Asset intensity varies
Financial Services P/B or P/E Book value focus
Energy 4-8x Commodity sensitive
Real Estate Cap rate NOI based
Media 8-15x Content value matters

SaaS Revenue Multiples

Growth Rate ARR Multiple
< 20% 3-6x
20-40% 6-10x
40-60% 10-15x
60-100% 15-25x
> 100% 25x+

Common Adjustments

Adjustment Application
Illiquidity discount Private companies (20-35%)
Control premium Acquisitions (20-40%)
Size premium Small companies (add to WACC)
Country risk Emerging markets (add to WACC)
Minority discount Non-control stakes (15-30%)

DCF Template

# DCF Valuation: [Company Name]

## Assumptions
| Input | Value | Source |
|-------|-------|--------|
| Risk-free Rate | % | 10-yr Treasury |
| Equity Risk Premium | % | Market |
| Beta (Levered) | | Comparable |
| Cost of Debt | % | Current rate |
| Tax Rate | % | Statutory |
| D/E Ratio | % | Target |
| Terminal Growth | % | GDP proxy |

## WACC Calculation
Cost of Equity: %
Cost of Debt (after-tax): %
WACC: %

## Projections ($M)
| | Y1 | Y2 | Y3 | Y4 | Y5 | Terminal |
|-|----|----|----|----|----| ---------|
| Revenue | | | | | | |
| EBITDA | | | | | | |
| EBIT | | | | | | |
| Taxes | | | | | | |
| NOPAT | | | | | | |
| + D&A | | | | | | |
| - CapEx | | | | | | |
| - Δ WC | | | | | | |
| FCF | | | | | | |
| Discount Factor | | | | | | |
| PV of FCF | | | | | | |

## Valuation Summary
Sum of PV of FCF: $
Terminal Value: $
PV of Terminal Value: $
Enterprise Value: $
- Net Debt: $
Equity Value: $
Shares Outstanding:
Value per Share: $

## Sensitivity Analysis
[WACC vs Terminal Growth matrix]

Best Practices

Methodology Selection

  • Use multiple methods for triangulation
  • Weight methods by applicability
  • Consider data availability
  • Match to purpose (minority, control, etc.)

Assumption Setting

  • Ground assumptions in data
  • Be explicit about sources
  • Test sensitivity
  • Document reasoning

Presentation

  • Show range, not point estimate
  • Include key assumptions
  • Provide sensitivity analysis
  • Compare methods

Integration with Other Skills

  • Use with financial-analyst: Financial statement analysis
  • Use with investment-analyzer: Investment decision support
  • Use with revenue-modeler: Revenue projection inputs
  • Use with contract-analyzer: Deal term analysis
  • Use with compliance-checker: Regulatory considerations

Common Pitfalls to Avoid

  • Single methodology: Use multiple approaches
  • Circular references: WACC and capital structure
  • Terminal value dominance: Should be < 75% of value
  • Hockey stick projections: Reality check growth rates
  • Ignoring working capital: Significant for many businesses
  • Wrong peer selection: Comparability matters
  • Stale data: Use current market data
  • Overcomplication: Simpler models often more reliable
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Repository
eddiebe147/claude-settings
First Seen
Jan 1, 1970