Red Hat - Comparative Multiple Analysis

Red Hat (Comparative Multiple Analysis)

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Notes on the Comparative Multiple Analysis of Red Hat

WikiWealth compares Red Hat's revenue, EBITDA, and EBIT multiples to their peers in order to determine the appropriate fair valuation. Click in the top right corner to experiment with Red Hat's comparative analysis.

Notes from the analysis:

1. WikiWealth uses quantitative measures to determine the multiple range for Red Hat.
2. Free cash flow to the firm (FCF) multiple is free cash flow to equity holders plus interest owed to Red Hat's debt holders.
3. Multiples incorporate benefits due to economies of scale; WikiWealth compares absolute enterprise value multiples to competitor's multiples.
4. WikiWealth excludes outliers when calculating individual company multiples.

Helpful Information for Red Hat's Analysis


How does this work? The Comparative Investment Analysis determines the value of Red Hat by comparing Red Hat financial ratios, prices, growth rates, margins, etc. to those of relevant peer groups.

Value Investing Importance? This method is widely used by investment professionals to determine the correct price of investments, especially initial public offerings (IPOs). It is one element of WikiWealth's three Wall Street approaches used to determine the correct fair value of Red Hat.

See the Red Hat cash flow (DCF) analysis for a completely different approach that's popular on Wall Street for determining the value of an investment in Red Hat.

Also, see the Red Hat's buffett intrinsic valuation analysis for WikiWealth's attempt to replicate the investing formula's used by Warren Buffett and Red Hat's valuation conclusion for a quick summary.