In any industries, it’s very important for managers, professional advisors, and especially investors to find out accurate, timely and cost effective valuations of publicly or privately-held companies. Without valuating a business, you will miss the opportunity to ensure that it will survive and prosper in the future. To arrive at a range of values for a company, a good place to start is to identify public companies that have similar characteristics to those of your company, and then look at the valuation metrics they have used.This method is called the Comparable Worth Method. The ground rule is to examine companies that operate in the same or similar industry, providing the same or similar products and/or services.
The most common valuation metric to use is the P/E ratio, although other valuation metrics include: Price/Earnings, Price/Book Value, Price/Sales, Enterprise Value/EBIDTA, etc… But why should we use these ratios rather than the absolute numbers to compare? Because it is not possible to find companies that are the same as the target company in all respects.
For examples, since there are differences in the businesses’ sales volumes between two companies, it is more useful to compare the ratio of sales to costs, rather than absolute amounts of sales to each other. Comparisons of this type will provide a clearer picture of the strengths and weaknesses of the target company relative to those of others in its industry. We have conducted a review of companies similar to First Wind in the same wind industry to determine whether information on the value of these companies can be used in the valuation of First Wind.They engage in the production and sale of electricity based on the wind power, as well as in the development, construction and operation of wind energy projects. We have searched the database of InFinancial for recent peer companies of First Wind, and we also have reviewed other sources of information from their websites.
They are Greentech Energy Systems A/S from Denmark, Energiekontor AG from Germany, and Clipper Windpower plc from the UK. While they are solely producing electricity on the basis of wind power with relatively close Enterprise Values, they should be good comparable companies for First Wind.