Podcast
Questions and Answers
Which of the following is NOT a problem with the regression methodology for predicting PE ratios?
Which of the following is NOT a problem with the regression methodology for predicting PE ratios?
What is the fundamental difference between the 'comparable firm' approach and the regression approach to predicting PE ratios?
What is the fundamental difference between the 'comparable firm' approach and the regression approach to predicting PE ratios?
What does non-stationarity refer to in the context of the regression methodology for PE ratios?
What does non-stationarity refer to in the context of the regression methodology for PE ratios?
What is the main reason why the regression methodology for predicting PE ratios might not be appropriate if the relationship between PE ratios and financial proxies is not linear?
What is the main reason why the regression methodology for predicting PE ratios might not be appropriate if the relationship between PE ratios and financial proxies is not linear?
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Why is the regression methodology for predicting PE ratios considered to be statistically rigorous?
Why is the regression methodology for predicting PE ratios considered to be statistically rigorous?
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Why might multi-collinearity be a problem for the regression methodology for predicting PE ratios?
Why might multi-collinearity be a problem for the regression methodology for predicting PE ratios?
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How does the 'comparable firm' approach to predicting PE ratios differ from the regression approach in terms of its reliance on subjective factors?
How does the 'comparable firm' approach to predicting PE ratios differ from the regression approach in terms of its reliance on subjective factors?
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What is the main reason why the regression methodology for predicting PE ratios may not be reliable in situations where the relationship between PE ratios and financial variables is not stable over time?
What is the main reason why the regression methodology for predicting PE ratios may not be reliable in situations where the relationship between PE ratios and financial variables is not stable over time?
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Which statement best describes the relationship between PEG ratios and company risk?
Which statement best describes the relationship between PEG ratios and company risk?
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What explains a company having a higher PEG ratio?
What explains a company having a higher PEG ratio?
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Which of the following statements about book value multiples is correct?
Which of the following statements about book value multiples is correct?
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How do PEG ratios behave with very low or very high growth rates?
How do PEG ratios behave with very low or very high growth rates?
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What does a company trading below its book value generally imply?
What does a company trading below its book value generally imply?
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What does the enterprise value to EBITDA multiple measure?
What does the enterprise value to EBITDA multiple measure?
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Why is cash netted out from firm value when calculating enterprise value?
Why is cash netted out from firm value when calculating enterprise value?
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Which valuation ratio corresponds to the house price to rent ratio?
Which valuation ratio corresponds to the house price to rent ratio?
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Which aspect often leads to a biased estimate of a multiple?
Which aspect often leads to a biased estimate of a multiple?
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What happens to the valuation of a multiple if outliers are ignored?
What happens to the valuation of a multiple if outliers are ignored?
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How should the median be utilized in comparison to a multiple?
How should the median be utilized in comparison to a multiple?
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Which of the following describes 'partially diluted EPS'?
Which of the following describes 'partially diluted EPS'?
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What is the negative impact of having majority active interests on valuation?
What is the negative impact of having majority active interests on valuation?
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What is the predicted price to earnings (PE) ratio for Telebras using the regression formula?
What is the predicted price to earnings (PE) ratio for Telebras using the regression formula?
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What conclusion can be drawn from Telebras’s actual PE ratio of 8.9 compared to the predicted PE ratio?
What conclusion can be drawn from Telebras’s actual PE ratio of 8.9 compared to the predicted PE ratio?
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Which bank has the highest price to book value (PBV) ratio according to the data provided?
Which bank has the highest price to book value (PBV) ratio according to the data provided?
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Which option accurately describes a criterion for selecting stocks mentioned in the content?
Which option accurately describes a criterion for selecting stocks mentioned in the content?
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Which bank had a return on equity of 1.32%?
Which bank had a return on equity of 1.32%?
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Which of the following banks had a standard deviation of 22.55%?
Which of the following banks had a standard deviation of 22.55%?
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What is the average return on equity for the banks listed?
What is the average return on equity for the banks listed?
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What characteristic is NOT part of the stock selection criterion mentioned in the content?
What characteristic is NOT part of the stock selection criterion mentioned in the content?
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Which telecom company has the highest PE ratio based on the given data?
Which telecom company has the highest PE ratio based on the given data?
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What effect does being classified as an emerging market have on the PE ratio according to the regression results?
What effect does being classified as an emerging market have on the PE ratio according to the regression results?
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What is the R squared value for the relationship between PE and the given variables?
What is the R squared value for the relationship between PE and the given variables?
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Which company has a growth rate coefficient that is statistically significant?
Which company has a growth rate coefficient that is statistically significant?
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What is the growth rate associated with Gilat Communications?
What is the growth rate associated with Gilat Communications?
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Which company has a PE ratio closest to 20?
Which company has a PE ratio closest to 20?
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How many companies listed have a PE ratio above 30?
How many companies listed have a PE ratio above 30?
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Which of the following companies has the lowest PE ratio?
Which of the following companies has the lowest PE ratio?
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What is the significance level for the growth rate variable in the regression?
What is the significance level for the growth rate variable in the regression?
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What does an R squared value of 63.1% signify?
What does an R squared value of 63.1% signify?
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What is the ideal scenario for comparing firms using multiples?
What is the ideal scenario for comparing firms using multiples?
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Why is it difficult to find firms that share the same risk, growth, and cash flow characteristics of your firm?
Why is it difficult to find firms that share the same risk, growth, and cash flow characteristics of your firm?
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What is the trade-off when choosing between a small sample of firms that are 'just like' your firm and a large sample of firms that are similar but different in certain dimensions?
What is the trade-off when choosing between a small sample of firms that are 'just like' your firm and a large sample of firms that are similar but different in certain dimensions?
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What is the rationale behind the idea that a firm can be compared to another firm in a vastly different business if they share the same risk, growth, and cash flow characteristics?
What is the rationale behind the idea that a firm can be compared to another firm in a vastly different business if they share the same risk, growth, and cash flow characteristics?
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If you find that your firm is trading at a higher multiple than comparable firms, what does that suggest?
If you find that your firm is trading at a higher multiple than comparable firms, what does that suggest?
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What is 'story telling' in the context of comparing firms using multiples?
What is 'story telling' in the context of comparing firms using multiples?
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What is the primary goal of controlling for differences across firms when comparing multiples?
What is the primary goal of controlling for differences across firms when comparing multiples?
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How can direct comparisons be used to evaluate the value of a firm?
How can direct comparisons be used to evaluate the value of a firm?
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Flashcards
Price/Primary EPS
Price/Primary EPS
Ratio of price to earnings per share based on actual shares.
Price/Fully Diluted EPS
Price/Fully Diluted EPS
Ratio of price to earnings per share including all options.
Price/Partially Diluted EPS
Price/Partially Diluted EPS
Ratio of price to earnings per share counting only in-the-money options.
Enterprise Value
Enterprise Value
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EBITDA
EBITDA
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Housing Price Multiple
Housing Price Multiple
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Descriptive Tests in Valuation
Descriptive Tests in Valuation
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Outliers in Data Distribution
Outliers in Data Distribution
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PEG Ratio
PEG Ratio
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Efficiency in Growth
Efficiency in Growth
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High Reinvestment Rates
High Reinvestment Rates
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Book Value Multiple
Book Value Multiple
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Price to Book Ratio
Price to Book Ratio
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Comparable Firms
Comparable Firms
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Adjustment for Differences
Adjustment for Differences
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Direct Comparisons
Direct Comparisons
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Story Telling in Valuation
Story Telling in Valuation
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Sampling Choice
Sampling Choice
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Key Dimension Variation
Key Dimension Variation
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Valuation Multiples
Valuation Multiples
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Growth Rate Impact
Growth Rate Impact
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Net Income
Net Income
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Number of users
Number of users
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Regression Analysis
Regression Analysis
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Non-linearity
Non-linearity
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Multi-collinearity
Multi-collinearity
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R-squared
R-squared
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COVID effect on earnings
COVID effect on earnings
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Predicted PE Ratio
Predicted PE Ratio
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Telebras Overvaluation
Telebras Overvaluation
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Price-to-Book (PB) Ratio
Price-to-Book (PB) Ratio
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Return on Equity (ROE)
Return on Equity (ROE)
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Standard Deviation
Standard Deviation
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Low PB Ratio and High ROE
Low PB Ratio and High ROE
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Average PB Ratio
Average PB Ratio
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Median PB Ratio
Median PB Ratio
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Growth Rate
Growth Rate
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Adjusted R-squared
Adjusted R-squared
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Dependant Variable
Dependant Variable
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Independent Variable
Independent Variable
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Dummy Variable
Dummy Variable
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Coefficient
Coefficient
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Probability
Probability
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Emerging Market
Emerging Market
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Study Notes
Relative Valuation
- Relative valuation compares an asset's price to similar assets' market prices.
- Identifying comparable assets and obtaining their market prices is crucial for relative valuation.
- Standardizing prices into multiples allows for comparison.
- Comparing standardized prices (multiples) of the asset being analyzed to comparable assets, controlling for differences between firms, helps determine if the asset is under or over-priced.
- Relative valuation is widely used in asset valuations, research reports, and acquisitions.
- While discounted cash flow (DCF) valuations are common, relative valuations often disguise themselves as a form of DCF valuation.
- Relative valuation is often more sensitive to market perceptions and moods.
- In relative valuation, a significant percentage of securities will always be either undervalued or overvalued.
The Essence of Relative Valuation
- In relative valuation, the price of an asset is compared to the prices assessed by the market for similar or comparable assets.
- To perform relative valuation, one needs to identify comparable assets and obtain their market prices.
- Converting these market prices to standardized prices, known as price multiples, is necessary for comparison.
- The standardized price or multiple of the asset being analyzed is compared to the standardized prices of comparable assets.
- Any differences between the firms influencing the multiple are addressed in the analysis to determine whether the asset is under or over-priced.
Relative Valuation is Pervasive
- Most asset valuations are relative.
- On Wall Street, equity valuations are predominantly relative valuations.
- Almost 85% of equity research reports rely on multiples and comparables.
- Acquisition valuations often use multiples.
- Rules of thumb derived from multiples frequently drive final valuation decisions.
- Consulting and corporate finance frequently use discounted cash flow (DCF) valuations as disguised relative valuations.
- Multiple estimations often back into the objective valued using a calculated multiple in many DCF valuations.
- The valuation of the terminal value in most DCF valuations utilizes a multiple.
The Market Imperative
- Relative valuations are more likely to reflect market perceptions and moods compared to discounted cash flow valuations.
- Relative valuation offers an advantage when prices are to reflect market perceptions and moods.
- Pricing a security today based on market perceptions (IPO).
- Relative valuation suits the needs of portfolio managers who are judged based on their relative performance (versus the market or other money managers).
- Relative valuation generally requires less information than discounted cash flow valuation (especially when multiples are used as reference points).
Multiples are Standardized Price Estimates
- Standardized estimates of asset pricing involve scaling the market value using income or book value as denominators.
- Examples include revenue, earnings, cash flow, and book value.
Four Steps to Deconstructing Multiples
- Defining a multiple and noting how it is defined by the user; critically important to understand how the multiple was estimated.
- Describing the multiple, including its cross-sectional distribution to see if the multiple looks too high or too low.
- Analyzing the multiple by understanding the fundamentals that drive the multiple and the relationship between the multiple and its components.
- Applying the multiple, including defining the appropriate comparable universe and controlling for differences.
Definitional Tests
- Is the Multiple Consistently Defined?
- Proposition 1: Both the value and the standardization variables should affect the same stakeholders in the firm. Examples include dividing equity value by equity earnings or equity book value, and firm value by firm earnings or firm book value.
- Is the Multiple Uniformly Estimated?
- Variables used in defining the multiple should be estimated uniformly across the list of comparable firms.
- Consistent accounting rules must be applied, when measuring earnings and book values, across similar assets.
Example 1: Price Earnings Ratio Definition (PE)
- A basic PE ratio is calculated by dividing the market price per share by earnings per share.
- Different variants exist, depending on how price and earnings are defined in practice. Examples including: current price, average price over the year; most recent financial year earnings or trailing 12 months earnings, or forecasted earnings for the next year or future years.
Example 2: Staying on PE Ratios
- In cases where companies have outstanding options, using the fully diluted EPS value of a company allows for more consistent comparison of PE ratios.
Example 3: Enterprise Value/EBITDA Multiple
- The enterprise value to EBITDA multiple is calculated by netting out cash against debt to arrive at enterprise value and dividing by EBITDA.
Example 4: A Housing Price Multiple
- One measure is the ratio of housing price to annual net rental income of a specific house.
- Determine when the price of housing is changing significantly by using a housing price /rent ratio and comparing it to the multiple at which stocks are trading.
Descriptive Tests
- Analyzing the average and standard deviation of a multiple across a market.
- Evaluating the median of the multiple as a more reliable comparison point.
- Investigating the distribution's outliers and how to handle them, to prevent bias.
- Determining instances where the multiple can't be estimated and whether ignoring these cases could introduce bias.
- Examining how a multiple has changed over time.
Multiples Have Skewed Distributions.. US Company PE Ratios
- PE ratios have skewed distributions, which complicates direct comparisons when the distributions are wide-ranging.
Making Statistics "Dicey"
- Statistical analysis of PE ratios can reveal inconsistencies or irregularities.
Markets Have a Lot in Common: Comparing Global PE
- Comparing PE ratios across different regions.
And the Differences Are Sometimes Revealing
- Comparing price to book ratios across different regions.
Simplifying Rules Almost Always Break Down
- Illustrating how simplistic multiple-based rules often fail when applied in practice.
But It May Work in 2024; Unless you Are in Japan or Russia
- Illustrating and comparing multiple values and trends for specific regions and countries.
Analytical Tests
- Determining the fundamentals that explain variation in multiples
- Understanding the relationship between fundamentals and multiples.
- Comparing companies properly requires knowledge of how fundamentals and multiples behave.
A Simple Analytical Device
- Relating intrinsic valuation models to multiple metrics.
I. PE Ratios
- Using a dividend discount model to understand fundamentals and calculate a PE ratio.
- Dividing both sides by current earnings per share to derive a formula for PE ratios.
- For FCFE Models, a similar formula can be constructed.
Using the Fundamental Model to Estimate PE for a High Growth Firm
- Building on the dividend discount models to estimate PE for high-growth firms, to incorporate two stages or more in the analysis.
A. PE, Growth, and Interest Rates
- Illustrating the effect of interest rates on PE ratios for high-growth and low-growth stocks.
- The relation shows how differing growth rates affect PE ratio movements, especially in low-interest rate environments.
B. PE and Risk: A Follow-up Example
- Illustrating how risk and growth affect PE levels.
C. PE and Growth Quality: Value Addition and Destruction
- Exploring how return on equity (ROE) influences PE ratios for various growth rates.
Example: The Cheapest Markets at the Start of 2024
- Identifying the regions with the lowest median EV/EBITDA and trailing PE.
Example 2: Controlling for Differences: An Old Example with Emerging Markets: June 2000
- Examples show PE ratios for multiple regions compared against interest rates, GDP growth, and risk factors.
Regression Results
- Using a regression model to analyze the relationship between PE ratios and other variables.
- Understanding how the coefficients from the regression relate to the variables in the regression model.
Predicted PE Ratios
- Using the regression model to predict PE ratios for various companies based on their characteristics.
Example 3: US Stocks are Expensive, Just Look at the PE Ratio
- Charts showcasing how US stock valuations (PE ratio) have changed over time when compared to normalized PE, CAPE, and Shiller PE.
A Counter: No, they are Cheap Relative to the Alternatives
- Analyzing historical PE ratios relative to T-Bond rates.
The Tie-Breaker
- Comparing Earnings yield, T-Bond rate, and the yield curve over time.
Regression Results
- Analyzing the relationship between Earnings Yield, T-Bond Rates, and Bond-Bill Rates in a multivariate analysis.
II. PEG Ratios
- Introducing the PEG ratio and how to determine it.
- Relating the PEG ratio to the fundamentals of a firm.
PEG Ratios and Fundamentals
- Exploring the effects of risk, payout, and assumptions on PEG ratios when comparing across companies.
A Simple Example
- Demonstrating how to compute PEG ratios using a two-stage dividend discount model.
A. PEG Ratio Are Risk-Sensitive
- Exploring how growth rate and beta influence PEG ratios.
B. PEG Ratios Are Affected by the Quality of Growth
- Analyzing the impact of ROE on PEG ratios for different growth rates.
C. PEG Ratios Are Not Growth Neutral
- Demonstrating how risk-free rates may affect PEG ratios.
PEG Ratios and Fundamentals: Propositions
- Outlining propositions regarding comparative ratios for firms with high and low risk.
- Identifying characteristics that explain differing behavior in PEG ratios across firms.
- How growth and investing styles differently affect valuation.
III. Book Value Multiples
- Explaining how book value multiples are determined and how they can be used.
- Explaining that companies trading below their book value may be undervalued.
Price to Book Ratio: Determinants
- Using a dividend discount model to derive underlying principles affecting price to book ratios.
- Applying expected and preceding period earnings to calculate price to book ratio.
Price Book Value Ratio: Stable Growth Firm: Another Presentation
- Developing formulas and methods for calculating price to book value ratios for firms exhibiting predictable growth characteristics, while considering the firm’s cost of capital.
Now Changing to an Enterprise Value Multiple (EV/Book Capital)
- Transitioning to calculating enterprise value using free cash flows to the firm model.
- Understanding the relationships between enterprise value, the cost of capital, and growth to interpret EV calculations.
IV. EV to EBITDA Multiples
- Discussing EV/EBITDA multiples and their common usage, variations, strengths, and weaknesses.
EV to EBITDA - Determinants
- Developing financial ratios and expressions for enterprise value to EBITDA using cost of capital, and relevant growth factors to show the underlying mechanics.
A Simple Example
- Demonstrating how to compute EV/EBITDA multiples in practical situations.
The Determinants of EV/EBITDA
- Exploring the variables that impact the EV/EBITDA multiple across various situations.
V. Revenue Multiples
- Discussing and showing how you can use revenue to scale market value. Providing specific examples like EV/Sales ratios.
- The reason for using revenue multiples rather then other multiples is that revenues, unlike some other data points, cannot be negative
EV/Sales Ratio: Determinants
- Outlining the factors governing the EV/Sales ratio.
The Value of a Brand Name
- Discussing one of the weaknesses in standard valuations- the failure to account for important intangibles such as brand name value.
Valuing Brand Name
- Showing data on how to calculate and determine brand name value.
Application Tests
- Defining a "comparable" firm.
- Addressing how to adjust for differences in fundamentals between compared firms.
The Sampling Choice
- Ideal versus actual situations when choosing comparable firms to perform relative valuation analysis.
- Acknowledging that it is often difficult or impossible to find comparably similar firms.
The "Control for Differences" Choices
- Providing methods for controlling for differences across firms when relative valuation is done.
1. Just Story Telling
- Illustrating that often just using your judgment on why a firm may be cheap or expensive is adequate and justifiable approach when performing a relative valuation of a company.
A Question
- Presenting a question regarding the valuation of a company (example using a low PE ratio) .
2: Statistical Controls
- Comparing PE ratios across telecom companies.
- Showcasing how to use statistical analysis with multiple companies or sectors to more precisely determine valuation.
PE, Growth, and Risk
- Using a regression model to analyze the relationship between a firm’s PE ratio, growth rate, market position in an analysis of risk.
Is Telebras Under Valued?
- Assessing the valuation of Telebras by comparing its actual PE ratio to the predicted PE value.
3. An Eyeballing Exercise
- Calculating PBV ratios across European banks to show a specific analysis example.
The Median Test
- Detailing how to use median values for variables to determine a company is undervalued/overvalued based on specific criteria.
The Statistical Alternative
- Demonstrating how to use a regression model by examining risk and return on equity (roe)
And These Predictions?
- Using the regression model to predict PBV and see if a company, specific to the example, is undervalued or overvalued, based on the analysis.
Example 4: More Statistics and a Larger Sample
- Exploring the relationship between price to book ratio (pbv) and return on equity for a large selection of firms.
Missing Growth?
- Showing results from a three-dimensional scatter plot (three variables: PBV, ROE, and future growth expectations) based on statistical calculation of various company's values.
PBV, ROE, and Risk: Large Cap US Firms
- Visual representation and statistical analysis (scatter plot and regression) describing the relationship between price to book ratios, future growth prospects, and beta to estimate the risk exposure, of a large selection of US firms.
Bringing it all Together
- Combining the techniques and methodology earlier in the chapter to perform a case study of a large number of US firms’ stock valuation using a statistical model.
Updated PBV Ratios
- Illustrating the relationship between price to book value (pbv) and return on equity (roe) in a scatter plot of the 10 largest market capitalized US companies in January 2024.
Example 5: Overlooked Fundamentals?
- Presenting data on EV/EBITDA analysis for trucking companies to show the practical application of this valuation method and highlight possible overlooked fundamentals in the analysis.
A Test on EBITDA
- Analyzing the valuation of a particular company (Ryder Systems) within its sector, relative to the rest of the firms in the sector, using EV/EBITDA as a means of determining valuation.
Example 6: Pricing Across Time: PS Ratios
- Analyzing how price-to-sales (PS) ratios move over time for grocery stores.
- Illustrate in a visual representation the relation between Price/Sales and Net Margin of various grocery stores over time (especially when those values changed significantly).
The Difference Two Years Can Make
- Showing how Price/Sales ratios have moved in companies over time and highlighting how Net Margins also changed at the same time using that example to understand how valuation could change for the specific (grocery) company.
Is This Steady State?
- Examining if pricing characteristics of the different companies have reached steady state by analyzing the relationship between Net Margin and Price/Sales (PS ratio), for several grocery stores analyzed over time.
There is a New Kid in Town
- Presenting an example of how a new entry of a company (e.g. Sprouts) could also fit within the overall relationship.
PS Ratios and Margins
- Using a regression analysis to show that Price/Sales(PS) are not significantly related to net margin—meaning expected margins, not current margins, matter.
Solution 1: Use Proxies
- Demonstrating how to use proxies for survival and growth in valuation analysis (using Amazon as an example).
Solution 2: Use Forward Multiples
- Illustrating how forward multiples can be useful for assessing valuation.
The Market Sets the Rules
- Emphasizing that pricing is determined by the market, regardless of specific valuation models.
An Example: Let the Market Tell You What Matters
- Illustrating the use of market data to guide pricing decisions when using a market pricing model.
Read the Tea Leaves
- Emphasizing the importance of considering market data in valuation analysis, using examples to illustrate the analysis in context to various firms.
Pricing Across the Entire Market: Why Not?
- Showcasing the technique of pricing all firms in a sector (compared to comparing a firm with others only in the same specific industry sector) using multiple regression and how risk, growth, and payout factors can be used in the analysis.
PE Ratio Versus the Market
- Presenting a scatter plot showing how the trailing PE ratio relates to the expected future growth in EPS over time for a large group of US firms.
PE Ratio: Standard Regression
- Using a regression model to analyze US stock PE and risk, growth, and payout proxies.
Problems with Regression Methodology
- Discussing potential problems in using a regression model for valuation including: non-linearity, non-stationarity, and multi-colinearity—problems inherent in using a regression model over several periods and across numerous companies.
Statistically Insignificant?
- Discussing how to interpret statistically insignificant coefficients in a regression model and how to handle them in relative valuation.
The Negative Intercept Problem
- Highlighting problems arising when the intercept in a regression appears to be negative and how to try to resolve this.
If a Coefficient Has the Wrong Sign
- Discussing how multi-colinearity may cause a coefficient to have a value sign inconsistent with expectations.
Using the PE Ratio Regression
- Showing how to use a pre-existing regression model to forecast and estimate valuation for different companies.
The Value of Growth
- Analyzing historical data on the effect of growth rate on a firms PE ratio.
II. PEG Ratio versus the Market
- Graphing an illustrative PEG ratio versus expected growth to show the relationship, while recognizing that relationships may differ across time and for various groups of firms.
PEG versus LN(Expected Growth).
- Demonstrating scatter plots for PEG and Expected Growth.
PEG Ratio Regression - US Stocks
- Performing a regression analysis to estimate PEG ratios for US stocks at a specific period in time.
I. PE Ratios Regressions across Markets
- Performing comparative regression analyses across multiple markets (US, Europe, Japan, Emerging Markets, Aus, Canada & Global).
III. Price to Book Ratio: Fundamentals Hold in Every Market
- Showing results from regression analyses showing underlying consistent relationships for PBV calculations across multiple regions and markets.
IV. EV/EBITDA Across Markets
- Performing regression analysis to display consistent relationships in EV/EBITDA multiples for various markets and regional groups of firms.
V. EV/Sales Regressions Across Markets
- Performing regression analysis to display consistent relationships in EV/Sales multiples for various markets and regional groups of firms.
VI. EV/Invested Capital
- Performing regression analysis to display consistent relationships in EV/Invested Capital multiples and relating them to growth and risk factors across multiple geographies (markets).
The Pricing Game: Choices
- Presenting different types of valuation choice options and the necessary considerations in relative valuation analysis.
Relative Valuation: Some Closing Propositions
- Offering concluding propositions on the strengths and weaknesses of relative valuation.
Reviewing: The Four Steps to Understanding Multiples
- Recap of the four fundamental steps used in multiple analysis.
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Description
Test your knowledge on the methodologies used for predicting Price-to-Earnings (PE) ratios, including regression and comparable firm approaches. This quiz covers key concepts such as non-stationarity, multi-collinearity, and the statistical rigor of regression methodologies. Challenge yourself to differentiate between these analytical techniques!
