TTM vs PY SDE

by a searcher from Louisiana Tech University - College of Business

1 year ago

Broker wants to value business using higher TTM SDE, I think It should be the lower PY SDE. Which is the accepted approach for valuing the business. Also should i be looking at the schedule C numbers (cash basis)  in my calculation or just on the income statement (accrual basis). Schedule C is showing far less earnings than P&L btw.

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5 comments

searcher from Queen's University

If there is a reason you feel very compelled to use PY but the broker and seller won't budge on using and want TTM, then just work backwards to the multiple based on your calculation. Say you want to offer a 3X on PY numbers, then maybe you offer a 2.8X on TTM numbers.

1 month ago | like reply | 0 likes

investor from Vanderbilt University

TTM is commonly used to re-trade up or down depending on which side you are on. As Robert said, understanding the trends on the movement would be key...hopefully the growth and uptick is sustainable and its worth spending a bit more to purchase a growing business with good momentum versus the contrary. I also wouldn't focus exclusively on cash. Schedule C...accrual basis is much more telling the majority of the time.

1 year ago | like reply | 0 likes

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