Market-Based Valuation:

Price and Enterprise Value Multiples

기업가치분석: 중앙대학교 경영학부 박창헌 교수

Warm-Up: MULTIPLES

Price multiples (such as P/E, P/B, PEG, P/S, P/CF ratios) are among

the most widely used tools for valuation of equities. Comparing stocks'

price multiples can help an investor judge whether a particular stock is

overvalued, undervalued, or properly valued in terms of measures such

as earnings, book value, sales, or cash flow per share.

Enterprise value multiples (such as EV/EBIDTA ratio) relate the

total value of a company, as reflected in the market value of its capital

from all sources, to a measure of operating earnings generated, such as

earnings before interest, taxes, depreciation, and amortizaton.

Momentum indicators compare a stock's price or a company's

earnings to their values in earlier periods.

1

Approaches to Using Multiples in Valuation

You should distinguish between the method of comparables and

the method of forecasted fundamentals as approaches to using

multiples in valuation.

2

Example: Method of Comparables

3

Example: Method of Forecasted Fundamentals

4

Example: Method of Forecasted Fundamentals

5

PRICE MULTIPLES

Price multiples are ratios of a common stock's market price to

some fundamental variable. The most common example is the

price-to-earnings (P/E) ratio.

A justified price multiple is what the multiple should be if the

stock is fairly valued.

If the actual multiple is greater than the justified price

multiple, the stock is overvalued; if the actual multiple is less than

the justified multiple, the stock is undervalued (all else equal).

6

P/E (Price-to-Earnings) Ratio

7

P/E Ratio

8

P/E Ratio

9

P/B (Price-to-Book) Ratio

10

P/B Ratio

11

P/B Ratio

12

P/B Ratio

13

P/B Ratio

14

P/B Ratio

15

P/S (Price-to-Sales) Ratio

16

P/S Ratio

17

P/S Ratio

18

P/S Ratio

19

P/S Ratio

20

P/CF (Price-to-Cash Flow) Ratio

21

Dividend Yield (D/P)

22

Dividend Yield

23

Dividend Yield

24

Price and Enterprise Value Multiples

기업가치분석: 중앙대학교 경영학부 박창헌 교수

Warm-Up: MULTIPLES

Price multiples (such as P/E, P/B, PEG, P/S, P/CF ratios) are among

the most widely used tools for valuation of equities. Comparing stocks'

price multiples can help an investor judge whether a particular stock is

overvalued, undervalued, or properly valued in terms of measures such

as earnings, book value, sales, or cash flow per share.

Enterprise value multiples (such as EV/EBIDTA ratio) relate the

total value of a company, as reflected in the market value of its capital

from all sources, to a measure of operating earnings generated, such as

earnings before interest, taxes, depreciation, and amortizaton.

Momentum indicators compare a stock's price or a company's

earnings to their values in earlier periods.

1

Approaches to Using Multiples in Valuation

You should distinguish between the method of comparables and

the method of forecasted fundamentals as approaches to using

multiples in valuation.

2

Example: Method of Comparables

3

Example: Method of Forecasted Fundamentals

4

Example: Method of Forecasted Fundamentals

5

PRICE MULTIPLES

Price multiples are ratios of a common stock's market price to

some fundamental variable. The most common example is the

price-to-earnings (P/E) ratio.

A justified price multiple is what the multiple should be if the

stock is fairly valued.

If the actual multiple is greater than the justified price

multiple, the stock is overvalued; if the actual multiple is less than

the justified multiple, the stock is undervalued (all else equal).

6

P/E (Price-to-Earnings) Ratio

7

P/E Ratio

8

P/E Ratio

9

P/B (Price-to-Book) Ratio

10

P/B Ratio

11

P/B Ratio

12

P/B Ratio

13

P/B Ratio

14

P/B Ratio

15

P/S (Price-to-Sales) Ratio

16

P/S Ratio

17

P/S Ratio

18

P/S Ratio

19

P/S Ratio

20

P/CF (Price-to-Cash Flow) Ratio

21

Dividend Yield (D/P)

22

Dividend Yield

23

Dividend Yield

24

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