marius dot org » blodgett http://www.marius.org My random ramblings and musings Sun, 05 Feb 2012 10:01:43 +0000 en hourly 1 http://wordpress.org/?v=3.3 25x revenue is a company valuation? Huh? http://www.marius.org/feeder/?FeederAction=clicked&feed=Articles+%28RSS2%29&seed=http%3A%2F%2Fwww.marius.org%2F2008%2F05%2F08%2F25x_revenue_is_a_company_valuation_huh%2F&seed_title=25x+revenue+is+a+company+valuation%3F+Huh%3F http://www.marius.org/feeder/?FeederAction=clicked&feed=Articles+%28RSS2%29&seed=http%3A%2F%2Fwww.marius.org%2F2008%2F05%2F08%2F25x_revenue_is_a_company_valuation_huh%2F&seed_title=25x+revenue+is+a+company+valuation%3F+Huh%3F#comments Thu, 08 May 2008 20:58:28 +0000 marius http://www.marius.org/2008/05/08/25x_revenue_is_a_company_valuation_huh.php Continue reading →]]> I was reading the article by Mark Evans that laid out how Flickr could have an independent valuation of $4 billion dollars.  He used a multiplier defined by Henry Blodgett in determining the value of Facebook: 25 times a company’s annual revenue is their valuation.

Wow.

I decided to apply this to a few other companies that have been in the news lately: Yahoo!, Microsoft, and Google.

Based on 2007 10K filings for each company:

Company Annual Revenue Valuation Market Cap (as of 5/8/2008)
Yahoo! $6.425B (2006) $160.625B $36.08B
Microsoft $51.122B (2007) $1.278T $272.60B
Google $16.593B (2007) $414.825B $182.92B

This gives between 2.5 and 4.5 of over-estimate in independent publicly traded companies.  I’m not a finance guy, but it seems like that 25 times number is quite a stretch, to me.

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