1 / 65

Market-Based Valuation: Price and Enterprise Value Multiples

Market-Based Valuation: Price and Enterprise Value Multiples. Presenter Venue Date. Valuation Indicators. Methods for Price & Enterprise Value Multiples. Price-to-Earnings Multiple Rationales & Drawbacks. Price-to-Earnings Multiple Definitions. Example: Forward P/E. Example: Forward P/E.

damali
Download Presentation

Market-Based Valuation: Price and Enterprise Value Multiples

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Market-BasedValuation:Price and Enterprise Value Multiples Presenter Venue Date

  2. Valuation Indicators

  3. Methods for Price & Enterprise Value Multiples

  4. Price-to-Earnings MultipleRationales & Drawbacks

  5. Price-to-Earnings Multiple Definitions

  6. Example: Forward P/E

  7. Example: Forward P/E

  8. Example: Forward P/E

  9. Issues in Calculating EPS

  10. Example: Underlying Earnings

  11. Example: Underlying Earnings

  12. Example: Normalized Earnings

  13. Example: Normalized Earnings

  14. Example: Normalized Earnings

  15. Justified Forward P/E from Fundamentals

  16. Justified Trailing P/E from Fundamentals

  17. Example: Justified Forward P/E from Fundamentals

  18. Example: Justified Forward P/E from Fundamentals

  19. Example: Justified P/E from Regression on Fundamentals

  20. Example: Justified P/E from Regression on Fundamentals

  21. Method of Comparables

  22. Method of ComparablesUsing Peer Company Multiples • Law of one price • Risk and earnings growth adjustments • PEG limitations: • Assumes linear relationship • Does not account for risk • Does not account for growth duration

  23. Example: Method of ComparablesUsing P/E and PEG

  24. Example: Method of ComparablesUsing P/E and PEG

  25. Method of ComparablesUsing Industry and Market Multiples • Industry or Sector Index • Mean vs. median • Check industry valuation against market • Broad Market Index • Adjust for differences in fundamentals & size • Use relative values on a historical basis

  26. Method of ComparablesValuing the Market • Fed Model: Earnings Yield vs. T-Bond Yield • Does not account for inflation correctly • Relationship between earnings yield & interest rates is nonlinear • Small rate s → large s in P/E • Yardeni Model

  27. Method of ComparablesUsing Own Historical Multiples • Rationale: Regression to the Mean • Approaches: • Average of four middle values over past 10 years • Five-year average trailing P/E • Potential Problems from Changes in • Firm business • Firm financial leverage • Interest rate environment • Economic fundamentals • Inflationary environment

  28. Using P/Es for Terminal Value

  29. Example: Using P/Es for Terminal Value

  30. Example: Using P/Es for Terminal ValueUsing Gordon Growth Model

  31. Example: Using P/Es for Terminal ValueUsing Comparables

  32. Price-to-Book Value MultipleRationales

  33. Price-to-Book Value MultipleDrawbacks

  34. Adjustments to Book Value

  35. Justified P/B

  36. Price-to-Sales Multiple Rationales

  37. Price-to-Sales Multiple Drawbacks

  38. Justified P/S

  39. Example: Calculating the Actual & Justified P/E, P/B, & P/S

  40. Example: Calculating the ActualP/E, P/B, & P/S

  41. Example: Calculating the Inputs for the JustifiedP/E, P/B, & P/S

  42. Example: Calculating the JustifiedP/E, P/B, & P/S

  43. Price-to-Cash-Flow Multiple Rationales

  44. Price-to-Cash-Flow Multiple Drawbacks

  45. Definitions of Cash Flow

  46. Justified Price-to-Cash-Flow Ratio

  47. Dividend YieldRationales & Drawbacks

  48. Justified Dividend Yield

  49. Inverse Price Ratios

  50. Enterprise Value/EBITDA Multiple Rationales & Drawbacks

More Related