A New Look at Company Valuations

NPRC recently sent out an email offering a free copy of a previously published company valuation chart. The chart compared 35 different offset/digital printing firms in terms of gross sales and estimated value. The chart provides a summary of 35 valuations conducted in the past eight years by QP Consulting, Inc.. The data provided illustrates huge variations in valuations for printing firms reporting similar annual sales.

Click on the chart to view and download the entire chart comparing 35 valuations.

 The chart (see above) also clearly notes that there is little relationship between annual sales and the estimated value of the business. When you compare the estimated value of printing firms as they relate to their reported annual sales the results are nothing short of startling.

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Our recent email on valuations also referred readers to an article previously published on this website titled, 10 Suggestions for Increasing Company Value. If you’ve never read the article now’s your chance. We encourage you to visit this website by clicking on the Blog Tab above.

There you will have a chance to explore dozens of valuable articles and posts. Yes, some do promote previous studies and publications, but others are offered to assist fellow printers confronting various challenges in the industry.

Ten New Firms Examined

Spurred on as we examined the data from the previous valuation chart, we decided to pull out some newer folders and examine a random selection of ten valuations conducted in the past 18 months. Below is a chart depicting some of these more recent valuations.

Of special interest is that while the average annual sales of our recent sampling came very close to our previous sample of 35 firms, there was a significant increase in the average estimated value of our newest sampling when expressed as a percent of sales.

In our earlier analysis of 35 firms, the average value as a percent of sales was 49.3% and the median was 44.1%. In our newest extraction of ten firms, the average percent of sale valuation was 62.7% and the median was 63.8%. Put simply, the value or estimated worth of the average company requesting our services appears to have increased.

Recent valuations coming in at higher values relative to annual sales.

Company Values Increase

The far right-hand column below simply indicates value of the firm in question in terms of percent of gross sales. (Example: Our valuation of Anderson Digital estimated that we believed the firm was worth 79.5% of its most recent annual gross sales.) It is critical to note that just because we calculated an estimated value for a firm does not mean that it would likely sell for that amount!

The reality of the market today is that even healthy, profitable firms may not sell for anything close to what the formulas say they are worth. In fact, it is quite possible that despite the best efforts some firms might never sell.

Is there an explanation for this increase? Yes, we believe the increase can be attributed to the fact that the industry continues to shrink in size, and we are indeed looking at a situation of survival of the fittest where only the healthiest of printing firms can survive. Of course that doesn’t mean all of our ten firms are healthy, but it does mean that competition in terms good to excellent financial ratios is improving.

Are Firms More Attractive to Buyers?

As a general rule, firms that continue to survive and prosper today are indeed financially stronger firms. Nonetheless, just because many of these firms appear to be stronger and healthier than those previewed in the past, it does not mean they are necessarily more attractive to potential buyers.

Like it or not, there are not a lot of “newbies” out there looking to buy a printing firm – printing is no longer perceived as a growing industry that one should consider and explore. Most potential buyers are existing printing firms wishing to expand their sales and customer base through acquisitions rather than generating new sales.

 

 

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