Tag: Business
-
Why revenue growth doesn’t always increase value
We recently worked on a valuation where increasing revenue growth actually led to lower net income. This is because growth often comes with additional fixed costs — new staff, larger facilities, expanded operations. If the incremental revenue isn’t enough to cover those costs, profits can actually decline in the short term. So during expansion, you…
-
“When a forecast looks too good to be true…”
Sometimes during a business valuation, management shows us a revenue projection that suddenly jumps far above the last few years. Maybe revenue was flat for 3 years…Then the forecast shows a big surge next year. At that point, we have to ask a simple question: “What is driving this growth?” If the answer is “We…
-
Is Your Business Hanging by a Thread?
When valuing companies with high levels of debt, one thing often becomes clear: Some businesses are operating very close to the survival line. Interest expenses and other fixed costs don’t wait.Because of this, companies often need to maintain certain numbers just to keep enough cash for daily operations. In many cases, survival depends on three…
-
Using P/E ratio to value a company sounds simple.But it’s often wrong.
Sometimes clients ask if we can estimate the value of a company by simply applying P/E or P/B ratios from listed companies in the same industry. In theory, the approach is straightforward. We take the book value or earnings of the target company (from the latest audited financial statements) and multiply it by the P/B…
-
Why Cash Is King 👑
When we do a business valuation, the most important item isn’t revenue nor profit. It’s the cash. Because at the end of the day, a company survives on cash — not accounting entries. Revenue can be recorded…but the cash might not come in yet. Expenses can be booked…but the payment may not have gone out.…
-
Debt Restructuring 🚨 Warning sign… or survival strategy?
Sometimes, the hardest part of reviewing a company is seeing how much financial pressure it has gone through. We recently evaluated a company with a history of losses and a significant amount of bank debt. Under normal circumstances, the repayment burden would have severely strained its cash flow. But instead of defaulting, the company negotiated…
-
Why using P/E alone might be misleading
A recent client tried to estimate their company’s value by applying the P/E ratio of similar listed companies.While PE is one of the most popular methods being used , it’s not a recommended one for this company. Here is why. Two companies can be in the same industry…and still be completely different businesses. Different: And…
-
📉 Revenue Down 3 Years in a Row… But Is the Business Actually Weak?
Recently worked on a valuation for a construction company. On paper, it didn’t look good. Revenue declined three years in a row. However, the company had a solid backlog — with signed confirmation letters from customers proving they won the bids. So revenue is coming but will the margins hold? In this case, valuation depended…
-
Why we still need a management interview (even when we already have all the documents)
When doing a business valuation, yes — we have an information request list (IRL).Yes — we collect solid documents.Yes — we look at audited financial statements. But documents only tell us what happened.They don’t tell us why. For example:• Why did revenue drop last year?• Why did interest expense suddenly spike?• Was it a one-off…
-
Why we still ask for internal financial statements (even when audited FS exist)
Usually when we do business valuation we focus on th audited financial statements where numbers have been verified by the auditors. However we still need to get the company’s internal financial statements because we need the latest information available. Business valuation is forward-looking.And internal FS give us the latest reality. We need to understand: Internal…
ORNA Company Limited 