Football field technique is used to show the valuation rage as per the various techniques like P/E, EV/EBIDTA, EV/Sales etc. It gives a quick visual snapshot of the range of values as per the various valuation techniques
This is then used for comparison where our valuation stands vis-a-vis the valuation we got through various relative valuation techniques
In the image given below a football field comparison is done for the valuation by various methodologies like P/E, EV/EBIDTA, EV/Sales
All big firms use this for the final presentation to the managing director.
Drawing the football field
· The charting mechanism used for making a football field is a horizontal chart.
· Plot a horizontal bar graph between the valuation techniques and Starting and Difference values
· A two part bar graph comes. Make the first part invisible by making no-fill and no-border option
· Then place a round football shape on the chart on the basis of the DCF valuation
The graph corresponding to the football field valuation of LinkedIn is shown below
Key points from the football field of LinkedIn attached below
· Based on P/BV multiple the price of share varies between 22.8 and 28.7
· Based on P/E multiple the price of share varies between 26.2 and 62
· Based on EV/EBIDTA multiple the price of share varies between 30.7and 65.6
You can learn more about football field technique as part of our financial modelling course at Edupristine. To know how football field is used in LinkedIn model download the complete model here. To know more, quickly write an email to firstname.lastname@example.org.