ABC company wants to acquire XYZ. XYZ forecated the the follwoing:

	EV		Sales	EBITDA	EV/Sales	EV/EBITDA
Year	($M)		($M)	($M)	x	x
2018	$ 186,196,400		$98,600,000	$13,700,000	1.9	13.6
2019	$ 186,196,400		$112,200,000	$17,500,000	1.7	10.6
2020	$ 186,196,400		$150,100,000	$19,000,000	1.2	9.8

ABC Company wants to compare XYZ with its peers.

	EV/Sales	EV/EBITDA	Total Debt
Company	x	x	to EV
A	2.92	9.88	0.11
B	1.15	8.89	0.25
C	3.52	14.52	0.22
D	4.06	15.99	0.18
Average
Median

Is XYZ good to buy? If not which company is a better buy?

Answer rating: 100% (QA)

To assess whether XYZ is a good acquisition target compared to its peers we need to analyze its financial performance relative to the industry averages provided for EVSales EVEBITDA and Total Debt to EV ratios First lets calculate the average and median values for each ratio based on the data provided for the peer companies A B C and D For EVSales Average EVSales 292 115 352 406 4 2915 Median EVSales Median of 292 115 352 406 329 For EVEBITDA Average EVEBITDA 988 889 1452 1599 4 1282 Median EVEBITDA Median of 988 889 1452 1599 1221 For Total Debt to EV Average Total Debt to EV 011 025 022 018 4 019 Median Total Debt to EV Median of 011 025 022 018 020 Now lets compare the ratios of XYZ 20182020 averages to the industry averages XYZs Average EVSales 16 average of 19 17 and 12 XYZs Average EVEBITDA 1133 average of 136 106 and 98 XYZs Average Total Debt to EV To be calculated based on the provided data Now lets compare XYZs ratios to the industry averages XYZs EVSales 16 is lower than the average 2915 and median 329 industry ratios indicating that XYZ has a lower valuation relative to its sales compared to the industry average ... View the full answer