Construction Industry Overview
The global construction industry is estimated to reach around $10.5 trillion by 2023. Construction companies can be profitable, with the top 25 firms in the industry each earning an average of $1.8 billion in revenue per year. However, the average profit margin for construction companies is 6.4%, relatively lower than other industries like tech with an average profit margin of 18%.
Increasing Profitability in Construction
To improve profitability in construction companies, focus on controlling material costs, hiring skilled labor, and managing project risk.
Valuation of Construction Companies
How are construction companies valued?
Construction company valuation methods include market-based, income-based, and asset-based approaches. Backlog, relationships with customers, equipment values, and financing capacity affect valuation. Common valuation methods include discounted cash flow analysis, capitalization analysis, comparable company analysis, and more.
What is the book value of a construction company?
The book value of a company is all of its material assets minus liabilities. Book value gives lenders and investors an accurate view of value by reflecting historical data and depreciation-adjusted values. Tangible assets are totaled and liabilities are subtracted to determine book value.