Build a Trading Comps Valuation Model

Identify a peer group for trading comps by matching industry, size, leverage, and margins, using ASIC code screens and Bloomberg/FactSet data to compile a final comparable table.

Learn to build a trading comps valuation model by selecting peers for Extreme Networks, analyzing competitors like Brocade, Cisco, Juniper, and Aruba, and integrating market and financial data.

Explore a complete comps model template, input and normalize peer data, compute market cap and EV, and analyze LTM and forward multiples across Extreme Networks and peers.

Enter general info for a comps valuation with Extreme Networks, including the share price and date, then source the latest quarter from the 10-Q or 10-K and related press releases.

Explain why diluted shares outstanding, not basic shares, determine market cap; cover stock options, warrants, convertible bonds, convertible preferred, stock splits, and dual classes of shares.

Determine diluted share count by analyzing options outstanding versus exercisable, using the treasury stock method to model proceeds and in-the-money options for standalone or merger and acquisition valuations.

Adjust share counts for stock splits to keep market cap accurate and understand dual class shares (class A and B) with varying voting rights, citing Google as an example.

Assess diluted shares by applying the money test and the dilutive vs anti-dilutive test for convertible preferred stock, including conversion price and dividends' EPS impact.

Explore how convertible debt parallels convertible preferred stock in dilution tests, covering conversion to common shares, book-value based conversion price tests, and excluding convertible interest expense in diluted calculations.

Assess whether the 2010 convertible preferred stock is in the money and dilutive after the anti-dilution test, using 8-to-1 conversion and $65 redemption to compute EPS.

Explain how restricted stock affects diluted shares, how vested stock is treated in basic versus diluted counts, and consider applying an illiquidity discount to invested restricted shares.

Learn how to identify the latest shares outstanding from 10-K/10-Q (and proxy 14A), and convert to diluted shares by incorporating option exercise and tranche data to refine the share count.

Input shares data, identify in-the-money tranches under the current share price, compute gross and net dilution using sum and sumproduct, and note no significant convertible securities.

Model historicals from the last fiscal year, the two prior years, and two current cumulative quarters using 10-k and 10-q data; standardize sign conventions and use diluted shares for eps.

Analyze non-GAAP adjustments for comps by normalizing EBITDA and net income from GAAP, removing stock-based compensation, restructuring, and non-recurring items using press releases and 10-K disclosures.

Normalize historical financials by excluding non-GAAP items from operating income and reconciling to gaap-based results, using stock-based compensation, depreciation and amortization, currency effects, and restructurings.

Learn to normalize quarterly results using non-GAAP reconciliations by excluding acquisition and integration costs, amortization of intangibles, and by adjusting diluted shares for per-share measures.

Learn how to adjust GAAP to non-GAAP results by excluding non-recurring items, calculate net debt, and derive enterprise value from market cap for comps analysis.

Apply non-GAAP adjustments to compute enterprise value from equity value by adjusting net debt with debt equivalents and non-controlling interest, including cash, non-operating assets, and preferred stock.

Calculate net debt from the balance sheet using 10-Q/10-K, highlighting cash, cash equivalents, and non-operating assets. Anchor forecasts with sell-side data from FactSet for EPS, revenue, and long-term growth.

Explain how to compare multiples across companies by aligning fiscal year ends to a common calendar year using partial-year fractions and calendar year earnings per share.

Apply calendarization formulas to align fiscal year forecasts with a December 31 calendar year. Use days differences and percentage adjustments to make year 1 and year 2 forecasts consistent.

Practice constructing a trading comps model by inputting brocade's general and shares data, including latest share price, basic shares outstanding, options outstanding and treasury stock effects, and related filings (10-Q/10-K).

Input historical financials from annual and quarterly reports, align income statement line items, and apply consistent sign conventions to normalize periods and estimate diluted earnings per share.

Normalize gap to non-GAAP results using the latest fiscal year press releases and reconciliations, adjusting for stock-based compensation, amortization, tax effects, and one-time items.

Normalize a quarter for a trading comps valuation model by applying non-GAAP exclusions—stock-based compensation, amortization, restructuring charges, and gain on sale—to derive a normalized Ebbitt figure and prep LTM data.

Apply a trading comps valuation model by extracting cash and debt, calendarization of forecasts, and comparing normalized EPS, revenue, and EV/Revenue across peers like Brocade, Extreme, Juniper, and Cisco.

Input Juniper Networks data into the trading comps model by pulling historical prices from Yahoo Finance and obtaining the latest 10-K, 10-Q, and proxy share counts.

Input income statement data and non-GAAP adjustments from press releases, reconcile GAAP to non-GAAP results, and incorporate depreciation, amortization, and share counts for LTM and quarterly periods.

Calculate Juniper's net debt using cash, cash equivalents, and investments, accounting for debt equivalents. Apply calendarization and estimates to forecast and compare comps across a calendar year.

Practice inputting general and shares data for a Cisco-based trading comps valuation, including share price, filings (8-K, 10-K, 10-Q), and related press releases to build accurate historical inputs.

Input historical GAAP data and apply non-GAAP adjustments—stock-based compensation, amortization, acquisition-related costs, and tax effects—to normalize net income and verify alignment with disclosed non-GAAP results.

Calculate net debt from the latest balance sheet data, validate with the 10-Q, adjust for non-operating assets and interest, then input Cisco forecasts and analyze trading multiples and football-field output.

Build a dynamic comps output sheet by implementing vlookup with match, creating a target dropdown, and linking input and operating data to populate revenue and multiples.

Learn to build a dynamic comps output sheet with a single adaptable formula, using VLOOKUP and error trapping, handling blanks, zeros, anchoring, and data validation for accurate multiples.

Analyze a dynamic valuation matrix that applies the median peer group to revenue multiple to estimate enterprise value and implied share price.

Build a football field matrix by constructing a floating bar chart that shows valuation ranges from multiple methodologies, using LTM revenue multiples and clearly labeled high, low, and median values.

Practice spreading comps for Reuben networks and F5 networks using the established approach, with less hand-holding this time. Analyze the resulting valuation matrix, football field, and output implications.

Learn to build a trading comps valuation model using Aruba Networks and F5 Networks, address share count decisions, non-GAAP adjustments, net debt, and analyze multiples from EV/EBITDA to revenue multiples.

Apply comps modeling concepts to build a comp set and gain hands-on valuation experience. Understand the strengths and limitations of the analysis and avoid common mistakes addressed in the course.

Identify and present non-GAAP adjustments for non-recurring items, including discontinued operations, extraordinary items, and accounting changes, as a separate line below net income, net of taxes, to clarify core profitability.

Explore how non-GAAP presentation treats nonrecurring items like restructuring charges and asset gains within the income statement, and how analysts adjust pretax results and tax effects to compare core profitability.

Examine how companies reconcile gap to non-gaap figures by excluding stock-based compensation, amortization, and non-recurring items, shaping non-gaap earnings and guidance.

Normalize earnings by excluding non-recurring items such as inventory write-downs and litigation gains, and assess how these adjustments alter forecasted margins, revenue growth, and EPS for trading comps.

Explore converting gap to non-GAAP results by identifying nonrecurring items like stock-based compensation and restructuring, then normalize costs and assess tax impact using a columnar template.