It’s cool for a business to use GroupOn, but does it hurt profits?
The jury is still out, but the increasing habit among retail clients to offer “daily discounts” is anecdotally contributing to decreased cashflow. One appraiser BVR spoke with recently said he’d done a valuation for a local clothing retailer who had seen operating profits drop by half due to increased use of the discounts. Apparently, [...]
Live NACVA Report: Add sensitivity analysis to your worksheets
Samuel Weaver recommends taking advantage of more of the risk analysis tools available to business appraisers…even if they’re simply little-used functions in Excel. For instance, while speaking to a room of over 200 NACVA members today in San Diego, Weaver asked how many routinely use senstitivity analysis in their DCF’s. About 15% of the room [...]
Is manufacturing now returning to North America? We hope Pippa Malmgren is right.
“Manufacturing is starting to move back to the west,” states Pippa Malmgren of the Canonbury Group with great confidence. Speaking to the CFA Institute a few weeks ago from the beautiful Usher Hall in Edinburgh, Scotland, she commented that you’re seeing events like the Chinese taking a position in Volvo. Or you’re seeing international investment [...]
Join Baker for management projections workshop
Join Christine Baker (ParenteBeard) for Thursday’s “Advanced Workshop on Management Projections and Forecasts,” a three-hour event focusing on the uses and abuses of management projections in the valuation process. Through case-studies, live examples, and hands-on tutorials, Baker will address how to use projections when they’re at their best, and when they’re incomplete or unrealistic. Baker [...]
Is there a capitalization rate limit? What do you think?
During the past couple of weeks, a question posted by Keith Borglum (Medical Practice Appraisal Valuation Services) LinkedIn’s BV Professionals Group elicited responses from a handful of valuation practitioners. Borglum asked: “is there a cap rate limit?” It is not surprising that some appraisers responded “it depends.” Joshua V. Azran (Azran Financial) said “it depends [...]
Look for analyst estimates to get comfortable with growth rate projections
“I’m glad that there are things like Consensus Economics or Value Line so I can explain to a judge that my forecast is based on reason and the thoughtfulness of a large number of experts,” says Gary Trugman. He recommends these sources as a way to add reliability to forecasts. Another source is estimates from [...]
12 warning signs of unreliable forecasts from Tarbell and Trugman
“It’s good to be talking about business forecasts with a lot of CICBV members in the room,” began Gary Trugman at his keynote session on working with financial projections in Miami at the ASA/CICBV Annual Business Valuation Conference. “You’re all already familiar with hockey sticks.” Trugman and his co-presenter Jeff Tarbell note that USPAP doesn’t [...]
Is probability-weighted forecasting in our future?
A discussion in the halls in Miami today centered around the increasing tendency of some appraisers to submit multiple projections of future incomes–perhaps low, medium, and high. There are some arguments for this practice; particularly in a market environment where volatility dominates. But, there are several arguments against this practice. First, you’ve now [...]
Court rejects use of historic three-year average under Daubert
Have you ever used a business’s three-year historical annual average to project sales and revenue growth, EBITDA or capital expenditures? Have you ever used the term “zone of insolvency” to describe a business on the brink of bankruptcy? Does your valuation report sometimes omit the precise formula used in your DCF? If you answered “yes” [...]
When all else fails, use a forward-looking approach to valuation
Keith Prescott addressed this question in last week’s BVR webinar Valuing Construction Companies. While his thoughts are particularly relevant to the hard-hit AEC market, they should be recalled in any valuation where volatility is pronounced. “The forward-looking approach will probably be the most valid given the current economic environment and in the near future,” said [...]
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