In this football field graph. We have seven valuation methods. Our first tip is to show the standalone valuation methods and the takeover valuation methods separately. The top four valuation methods on our graph show the value of this company as a standalone entity i.e. as it currently is. Whereas the bottom three values are the value of the company if it was taken over. We can see that the top four techniques give us a lower valuation. Whereas the bottom three give us a higher valuation. And this is because a takeover will include a control premium to be paid. This football field clearly shows the takeover values being higher than the standalone values and that gives readers confidence in our analysis. Secondly, we want the valuation bars to be not too narrow and not too wide.

Imagine having your car valued and the dealer said it was worth between 17,000 and 19,000. You might think that's a reasonable valuation range. Whereas if the dealer said it was worth between 17,000 and 17,002. That would seem a little too precise and evaluation between 10,000 and 60,000 would be so wide as a not be helpful. In this graph the second valuation range the P/E CY2 multiple looks very narrow. So we would prefer to widen that out by maybe looking at the see why one PE range rather than the CY2 as we have here. Next is looking at the last 12 months or LTM versus your forecast years CY1 and CY2 calendar year one and calendar year two. trading comps and transaction comps could in theory use any of these so which is best? Well for transaction comps we use LTM because that is the only information we will have available for transaction comps the last 12 months of earnings.

But in trading comps valuations, we may have lots more data available and If we have it we prefer to use forecast figures. This is because potential buyers want to value the company based on forecast EBITDA or forecast earnings. Because those the earnings that they will earn the forecast figures. And then choosing between the first or second forecast year CY1 or CY2. Normally, I would prefer CY1 because it's a little bit more certain than CY2. But if the year you are currently in CY1 is experiencing a shock economic event such as a recession. Then you may want to ignore it and go to CY2, which may be more reflective of the company's value in normal times. Next when creating the horizontal value bar. Do we take one data point and build a distribution around it? Ideally not. While it can be handy to find an average valuation or a median valuation and then build a horizontal bar that is 5% less than or greater than the average it isn't based in reality. A client could reasonably ask why didn't you go 6% either side of the average or 4% either side? Instead we prefer to use real high and low data points. We find a high comparable company and use trading comps to get a high value. Then find a low comparable company and use trading companies to get a low value. You can then always point to those comparable companies and back up your numbers with evidence from the real world if asked.

Whereas with a DCF we get one absolute value. So to create the valuation range, we need to flex the assumptions.

In the graph we flex the WACC from 6.7% to 7.1% and the long-term growth rate from 1.8% to 2.2% That's given us a valuation range between 20.23 and 23.33. When flexing your assumptions though remember we don't want to make that horizontal bar too narrow or too wide. The 52 week high low bar shows the extreme values that the share price reached in the last year. It's an important reference point for the other valuation methods.

In our football field, we can see the three stand-alone valuation techniques at the top. They all sit within the 52 week high low, which gives us confidence that the market and our values are in agreement.

Vertical share price line in red which shows the current share price is also close to our standalone values. Conversely if our standalone values were very different to the 52 week high low and different to the current share price line. We then need to explain why we have got to different values. Maybe we feel that the market is not taking into account information that's important in our eyes. It's okay for your values to be different. Just back it up with reasons. Lastly looking at the takeover valuation methods in the bottom three. Transaction comps and DCF with synergies are common to include here, but the premium paid is also useful. If the transaction comps multiples occurred in normal market conditions in the past. But we are currently in a recession now then those normal multiples from the past are unlikely to be achieved in these recessionary times. Instead the premium paid on those prior transactions they can be a useful alternative and can indicate how much of a premium to the current share price might be acceptable to the selling shareholders.