One trick to hone your valuation skills is to read merger proxies. Thank you Mr. Michael Price. Investment Bankers will do a valuation for an acquirer in a “Fairness” Opinion. You will learn more about how Wall Street values companies than through reading the typical brokerage research report. Investment bankers often lean heavily on multiples of comparable companies in arriving at their valuation. I wonder if the analyst arrives at a conclusion and then works backward.
Insight into other companies within an industry is another reason to read merger proxies.
Try to value American Dental Partners, Inc., ADPI, then compare your work to the investment bankers.
Go here to pick up the case study: http://www.scribd.com/doc/74913098/ADPI-Fairness-Opinion-2011