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APPLICATIONS

Motivation for providing this content

PointValue is focused on value - not just for financial reporting but also to assist business leaders with planning and decision making.  Rather than just produce static reports (although we do offer those as well) our aim is to provide you with interactive and dynamic tools which provide  information and insight.

The Applications (apps) on this page are a step in that direction.  We are providing them 'as is' for your information purposes.  Of course, every business is different so you should not regard these tools as providing a 'job ready' answer.  We hope instead that these apps give you food for thought, spark some ideas - and of course we want to hear from you.

Live, click the button
Live, click the button
Please note:
  • The interactive apps on this page may not appear if you are using smaller devices such as phones.  Please revisit whilst on your laptop or tablet.
  • The information provided on this page is by way of example and for information only and is not intended as a valuation or remuneration opinion.

Value Multiples by Margins

a regression analysis of EV/Revenue versus EBITDA margins

Value by Margins

Instructions

Context: The app above provides an interactive visualisation of valuation multiples versus EBITDA margins for a selected industry sector:

  • The y-axis shows Enterprise Value (EV) / Revenue multiples. The x-axis is EBITDA margin.

  • Each circle on the scatter chart shows a comparable company from the selected sector (green=Aus, black=NZ, blue=US).

  • The orange line shows the line of best fit.

 

To use the app:

  1. Select an industry sector using the sector drop-down menu.

  2. Adjust the EBITDA Margin slider to a desired margin.

  3. A red circle will appear on the line of best fit at the selected margin, with the label showing the corresponding EV/Revenue multiple.

Interpreting the Results:

  • Hover your mouse over individual data points to see details of each company in the data set.

  • Hover your mouse over the orange lines of best fit to see the R squared - which indicates how well EBITDA margin explains variation in the EV/Revenue multiple (i.e. 'goodness' of fit).

  • The Target EV/Revenue multiple shown by the red circle is a prediction, based on the data, for a target company's multiple for a given margin.

Please Note:

  1. This app is provided for indicative information purposes only.  Nothing here should be taken as a valuation, which normally takes into account many more factors than just margin (e.g. industry forces, growth, capex, working capital, etc).

  2. A blog article will follow soon which provides additional explanation.

Calibrating Executive Incentives

a new way to think about performance targets

Calibration App

Instructions

Context: The app above provides an interactive visualisation of a common challenge when calibrating executive incentive plans, i.e. what should be the targeted level of performance, and for what level of reward?

  • The dark line and red circles depict the pay-off profile for the performance outcome (x-axis) versus pay-off (y-axis).

  • The blue histogram simulates the relative likelihood of performance outcomes.  The dark blue line shows the risk mean (average) of these outcomes.

 

To use the app:

  1. Enter your estimates for the 'worst possible', 'most likely' and 'best possible' cases for the simulated performance [initially set to 1%, 15%, 40%].  Note that the distribution will automatically recalculate.

  2. Use the slider above to set the % level of performance for the Threshold and Stretch targets (whether you mean % improvement or some absolute is up to you).

  3. At the bottom left enter the pay-off attributable for achieving threshold [initially set at 50%].  Achieving the Stretch target is assumed to align with 100% pay-off.

  4. If you wish to change the fixed rem and bonus of a notional participant - click on the 'Settings' tab.

Interpreting the Results:

  • The % figures in the coloured bars at the top of the chart show the proportion of outcomes which are below Threshold, between Threshold and Stretch, and above Stretch.

  • The "Design for Participant" shows the assumed fixed rem and incentive (can be changed on "Settings" tab).

  • The "Expected result" table summarises the risk mean (average simulated result) and the expected % payoff and $ result.  In other words, the expected or average the participant might receive using these calibration settings.

Please Note:

This app is provided for information purposes only.  Nothing here should be taken as a valuation or remuneration opinion.  Actual incentive designs are usually tailored to the specific needs of the organisation.

Next steps

If getting the calibration of targets in incentive plans is important to you PointValue can help.

 

To read more about the calibration of executive incentives check out this blog post.

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