Valuation World Cup: Semifinal 1 – To PK’s we go!

*Editor’s Note: Keep up to date on all things Valuation World Cup here!

The Semifinals begin!

It All Comes Down to Penalty “Quicks”

Matchup:

Group C Winner (EV/LCV) vs. Group B Winner (EV/Sales)

Highlights:

It’s been a physically brutal first 120’, and neither team could make any decided advances. Hmmm where have we seen that before… So here we sit, 0-0 with five quick “rounds” to go: five chances to get that valuation right or face elimination.

Company 1: “Handlr”  A Prosthetics Delivery Firm

EV/LCV quickly realizes that each customer has a low lifetime value because of low margins, and therefore will require significant growth in customer base which would be hard to achieve in the prosthetics industry. EV/Sales sees high topline figures for a young company aaand… overvalues. 1-0 EV/LCV.

Company 2: “Campr”  An Online Video Game for Pre-Teens

Both teams recognize that these developers can continue to churn out new games. EV/LCV adjusts up their current figures for that option of future value; EV/Sales used high growth comparables to reflect the potential. 2-1 EV/LCV.

Company 3: “Fishrman”  Analytics for Fishing Vessels

The tides turn as EV/Sales finds reasonable comps by using both analytic companies anchored by those in the food industry. EV/LCV, on the other hand, undervalues because early customers have been small independent fisheries whereas the future growth will come from larger corporate operations with much higher revenue coupled with lower onboarding costs of focused efforts. Even at 2-2.

Company 4: “Advr-tizr”  Digital Media Content for Millenials

Here’s where EV/Sales flexibility comes into play. This company is growing too fast to use current year revenues, so a one-year forward multiple is used. EV/LCV is up to the task as well, noting that their customer acquisition costs are decreasing, driving Advr-tizr’s LCV up in the future. Even at 3-3.

Company 5: “Smeltr”  Late-Stage Hardware Manufacturer

EV/LCV thinks they have it. They recognize the sales to academic research institutions and run with the notion that these high-value customers will continue to drive value. However, this market has already been saturated with their products. Any new sales with be fewer and further between. Their valuation sails over the crossbar! EV/Sales used late-stage comps and didn’t overweight the growth opportunities, securing their place in the final!!! EV/Sales wins 4-3.

Outcome:

EV/Sales 1-0 EV/LCV PK’s (4-3).

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One thought on “Valuation World Cup: Semifinal 1 – To PK’s we go!

  1. Pingback: The Valuation World Cup Begins! | Capital: Ventured.

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