Formula used to arrive at company’s market valuation ?

eBay / IT
manorama

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manorama
Mar 28, 2019 15 Comments

Lyft IPO at 22b, per share price of $72

How can someone arrive at this number ?

If it is based on future income , how far or rather how many years of discounted income is included to arrive at this valuation ?

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TOP 15 Comments
  • Google
    wqIe83

    Go to company page Google

    wqIe83
    IMO, It's a guess and what market is willing to pay. Amazon, Google, MS and Apple are close to a trillion, you can work backwards and find a multiplier, but it is really potential of the company and what market is willing to pay. One decent way is to compare with similar companies, for example a company that has similar revenue and growth rate.

    In other words, as good as bitcoin value.
    Mar 28, 2019 0
  • There’s a few methods you can use to triangulate at that fresh value: discounted cash flow for the next 5-7 years, looking at where similar companies in the industry trade, last price private investors paid etc.
    Mar 29, 2019 7
  • eBay / IT
    manorama

    Go to company page eBay IT

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    Coder
    manorama
    OP
    @google I am looking for source calculation? How do you arrive at the stock price in first place for freshly issued IPO ? There has to be some common ground or formula to it , versus some random number thrown out
    Mar 28, 2019 2
    • New / Eng
      🌲FD

      New Eng

      🌲FD
      I think it's based on the the prices investors paid in the last round more than anything else.
      Mar 28, 2019
    • Google
      perisher

      Go to company page Google

      perisher
      Formula is same regardless of IPO or not. Only difference with IPO is general public can buy vs only select few in private rounds.

      But in both cases, it is reverse engineered value. You take the valuation of the company that you are aiming for and divide it with the number of outstanding stocks. That is the value of the stock.

      Now how is valuation decided in first place, it varies based on the company. Some can use some multiple of profit, revenue, market size etc.
      Mar 29, 2019
  • Google
    perisher

    Go to company page Google

    perisher
    Stock price * number of outstanding shares = mcap
    Mar 28, 2019 0
  • GE
    Neo9

    Go to company page GE

    Neo9
    I can tell that it’s usually anywhere from 8x-12x times the revenue on IPO valuation. LYFT was doing 2.2b, do that’s around 22b.
    Apr 4, 2019 0