Editing Stockhub (section)

===Relative valuation approach===

====What's the expected return of an investment in Stockhub?====

The company estimates that the expected return of an investment in Stockhub over the next five years is 57x. In other words, an £1,000 investment in the company is expected to return £57,000 in five years time.

Assuming that a suitable return level over five years is 10% per year and Stockhub achieves its expected return level (of 57x), then an investment in the Stockhub company is considered to be a 'suitable' one.

====What are the assumptions used to estimate the return figure?====
{| class="wikitable"
|+Key inputs
!Description
!Value
!Commentary
|-
|Which type of multiple do you want to use?
|Growth-adjusted EV/sales
|For the numerator, Stockhub believes that to account for the different financial leverage levels of its peers, it's best to use enterprise value (EV), rather than price. For the denominator, Stockhub believes that because it expects to reinvest almost all of its revenue back into the business  over the five year forecast period and therefore its earnings are expected to be abnormally low over the period, it's best to use sales. Accordingly, Stockhub suggests valuing its company using the EV/sales ratio. However, Stockhub feels that to take into account the different business lifecycle stages of its peers, the most suitable valuation multiple to use is the growth-adjusted EV/sales multiple<ref group="Note" name="Note15" />, rather than the EV/sales multiple.
|-
|In regards to the growth-adjusted EV/sales multiple, for the sales figure, which year to you want to use?
| Year 5
|Stockhub suggests that with sales forecast to grow exponential over the five year forecast period, it's best to use forward-looking data, rather than historic data.


In regards to the growth-adjusted EV/sales multiple, for the sales figure, Stockhub suggests that in order to account for the forecasted exponential growth of the business, it's best to use one at the end of the forecast period (i.e. Year 5).
|-
|In regards to the growth-adjusted EV/sales multiple, for the sales growth figure, which year(s) do you want to use?
| Year 6 to 8, from now
|Stockhub suggests that for the sales growth figure, it's best to use Year 6 to 8.
|-
|In regards to the growth-adjusted EV/sales multiple, what multiple figure do you want to use?
|42x
|Stockhub's vision is for the Stockhub platform to be one of the most successful advertising platforms, and for that reason, it sees its closest peers as the owners of the leading advertising platforms. Those platforms are Facebook, Google Search, Youtube, Twitter, WhatsApp, Instagram and SnapChat. Note: Facebook, Instagram and WhatsApp are all owned by Meta Platforms, Inc, and Google Search and Youtube are all owned by Alphabet, Inc. The average multiple for those companies is 42x.
|-
|Which financial forecasts to use?
|Stockhub
|The only available forecasts are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those.
|-
|What's the current value of the Stockhub company?
|£4,000,000
|As at 23rd February 2022, the Stockhub company estimates the current value of its company at £4 million.
|-
|Which time period do you want to use to estimate the expected return?
|Between now and five years time
|Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.
|}

====Sensitive analysis====

The main inputs that result in the greatest change in the expected return of the Stockhub investment are, in order of importance (from highest to lowest):   

#The growth-adjusted EV/sales ratio (the default value is 42x);
#Stockhub peak market share (the default value is 2%).

The impact of a 50% change in those main inputs to the expected return of the Stockhub investment is shown in the table below.

{| class="wikitable sortable"
|+Stockhub investment expected return sensitive analysis
! Main input
!50% worse
!Unchanged
!50% better
|-
|Growth-adjusted EV/sales ratio
|28x
|57x
|86x
|-
|Stockhub peak market share

|28x
|57x
|86x
|}