Equity Valuation Using Multiples

Analyzing Volkswagen’s Value Based on Multiples Valuation Method

“…However, although the multiples valuation method is widely used in practice, it cannot replace fundamental equity valuation models such as DCF and RIV. It can only be used to supplement the fundamental equity valuation model, making the company valuation more comprehensive [12].…”

Private Firm Valuation Using Multiples: Can Artificial Intelligence Algorithms Learn Better Peer Groups?

“…Combining the industry criterion with additional filters, the conclusion of adding a company size filter (as a duplicating indicator of risk) to improve selection power was made [17]. By adding a regional filter to sort companies by location, from continents to specific regions to help investors align with their strategy or risk tolerance, diversify portfolios, and manage geopolitical risks [18], adding filters for profitability and intangible assets to assess a company's ability to generate profits, typically measured through metrics like net income, operating income, or profit margins [19], adding a growth filter to identify companies with high growth potential in terms of revenue, earnings, or market share for investors who often look for indicators such as historical revenue growth rates, projected earnings growth, or penetration into new markets [20], and adding some combination of profitability (e.g., looking for appropriate companies, also known as peer companies, for comparison [21,22]), growth, risk, and further financial ratio filters similarly find an improvement. In research [23], the authors conclude to use an industry filter combined with splitting profitability and risk filters into an industry component and a company-specific component, and in [24], the author concludes to combine the industry criterion with some macroeconomic indicators to improve the selection power of the industry filter.…”

Financial Statement Comparability and Managers’ Use of Corporate Resources

“…Consistent with this view, practitioners often use the information of comparable firms in the relevant peer 3 We find that the effect of the acquirer firm's financial statement comparability on the announcement of abnormal returns remains positive and significant, even after controlling for the target firm's financial statement comparability. group in their valuations of corporate transactions, such as initial public offerings, leveraged buyouts and equity carve-outs (Schreiner, 2009). Recent studies suggest that a firm is likely to use the CEO compensation information of its comparable peers to determine the compensation of its own CEO (e.g., Albuquerque et al, 2013); analysts' forecast errors and dispersion tend to increase when a firm uses less comparable accounting methods (Bradshaw et al, 2009;De Franco et al, 2011;; and auditors could use information of a client's comparable peers when performing analytical procedures (e.g., Hoitash et al, 2006;Minutti-Meza, 2013).…”