I found it to be more useful to use historical multiples within the context of past and future growth and business quality. Also, I use analyst estimates vs actual for the past 40-80 quarters as a proxy for modelabilty of this business. That kind of gives me a better idea where the future estimates might end up. Analysts usually project 3 years ahead, after that number of analysts making projections drop from 30ish to 5ish. I just slap a conservative multiple to the year 5 earnings, sometimes assuming multiple contraction. If I still get 10% plus CAGR, it is a good candidate.
Also, very solid take on this matter. Thank you!
I found it to be more useful to use historical multiples within the context of past and future growth and business quality. Also, I use analyst estimates vs actual for the past 40-80 quarters as a proxy for modelabilty of this business. That kind of gives me a better idea where the future estimates might end up. Analysts usually project 3 years ahead, after that number of analysts making projections drop from 30ish to 5ish. I just slap a conservative multiple to the year 5 earnings, sometimes assuming multiple contraction. If I still get 10% plus CAGR, it is a good candidate.
Fantastic - even more considering you are very young. Agree 100%.