If a company want to acquire a competitor, can we use ratios (from industry average) to derive the value of that target company?tks

Using multiples is one of the methods that practitioners often use in valuation. The biggest problem with this methodology is finding appropriate "comparable" companies. Using an industry average can filter out many issues but it is affected by outliers. For example, if one of the companies in the group performs unusually well or poorly (for some firm-specific reason), then your average will be skewed. Also, being classified in one industry doesn't necessarily make the companies in that industry your comparable. The target company may be in many different lines of businesses. Hence, using just one industry under this situation will result in a flawed valuation. You may end up having to make adjustments and using different comps to arrive at an appropriate valuation. That is, you may have to create your own peer group.There are many issues that arise in valuation that appear on a case-by-case basis. Experience and knowledge about the company's business will play a big role in arriving at the appropriate comps.

A company acquiring a competitor uses key variable of Future Maintainable Profits ( FMP). A competitors sales /expense forecasts are easier to be made and agreeable by both the parties. Using FMP companies arrive at Goodwill payment over a period of time.

anyone knows which ratios are suitable for analyzing the railroad companies?