Apply to the Target

Multiply the chosen peer multiple by the target's metric to get implied value, then judge whether the target deserves a premium or discount.

By the end you can

✓Derive an implied value from a multiple
✓Reason about premium vs discount to peers

\text{Implied EV} = \text{Peer Median (EV/EBITDA)} \times \text{Target EBITDA}

Worked example · Comps-implied share price

Given

•Target EBITDA $200
•Peer /EBITDA 9.0x
•Target net debt $300, shares 100

Solution

1.Implied
$9.0 \times 200 = 1{,}800$
2.Implied
$1{,}800 - 300 = 1{,}500$
3.Implied share price
$1{,}500 / 100 = 15.00$

Answer

Comps imply about $15 per share. Then ask: should this company trade above or below 9x given its growth, margins, and risk versus the peers?

Premium or discount

The is a starting point, not the answer. A faster-growing, higher-margin, lower-risk target deserves a premium to peers; a weaker one deserves a discount. Justify the multiple you actually apply.

Check yourself

Target EBITDA is $150 and the peer median EV/EBITDA is 8x. Implied enterprise value is: