Sanjay Bakshi Replies To A Mail From A Friend On Valuation

Sanjay Bakshi Replies To A Mail From A Friend On Valuation by Fundoo Professor

Begin forwarded message:

From: Sanjay Bakshi <sanjay>

Subject: Re: question

Date: 11 April 2015 10:11:48 GMT-4

To: XXXX

I don’t think in terms of entry multiples. I do think about exit multiples though and never value a business at more than 20 times owner earnings ten years from now. And I only limit to high ROE, low leverage businesses (most of my portfolio businesses are debt-free) which can grow earnings where return on incremental capital is high.

Under those conditions, no matter what the entry multiple, I can estimate a return over ten years. If entry multiple is high, I factor in a multiple contraction, and if low, then an...

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