Beta comps can be used to find beta for a private company or a new
company with not enough public trading history.
The four steps to do this are:
- Create a list of comparable companies which are similar in industry and size
- Unlever the betas to remove the impact of debt using Unlevered Beta = [1+(1 – tax rate) x Debt / Equity] / Levered Beta
- Find the median unlevered beta
- Re-lever the median unlevered beta using the target company’s capital structure: Levered Beta = Unlevered Beta x [1+ 1-tax rate) x Debt / Equity]