I see from the numbers you gave me, that your gross margin has shrunk slowly over the past four years. Mike is trying to see if your costs are controllable through the quality research he is performing. You and the buyer must assess what these and other variables will do down the road. Your assessments will determine how much someone is willing to pay, and how much you are willing to accept. I hope from what I have said so far that you can see the importance I place on forecasting the future.
Many analysts do look at current earnings and attempt to value business solely on that number.
A ratio is multiplied against a firm's current earnings and the result is used to set a selling price. However, Logan Printing is not a large firm, and its market is fairly narrow. It is not a national company. Attempting to compare its earnings with those of another company, especially a larger company in another jurisdiction, is faulty. Such comparisons are faulty because Logan Printing will most likely be very different than the large firm.