4.4.5: Valuation: Comparables

Premium Content
This section of the Encyclopedia of Private Equity is premium content and only available to accounts which have a subscription. If you have an account that has access to this section, please login now.

Abstract

At first glance the "comparable method" is easily the simplest. If you are trying to value, for example, a bushel of wheat in your barn, you take a look at the paper and find out what a bushel of wheat is selling for at the nearest dealer's place of business. Since one bushel of wheat is assumed to be exactly comparable to another - they are "fungible" commodities, in the language of the trade - the comparable method is pretty much a cinch. Of course, it will cost you something to get the wheat to nearest place where it can be sold and you have to factor that cost in when figuring out its value in your barn. But, if you're in the wheat selling business, presumably you have a pretty good handle on those costs and so you are just about there. If it