Category Archives: 4.5. Relative valuation

PSR Valuation of Deliveroo, Just Eat, and Delivery Hero

How to use PSR with the key fundamental factor to value companies   Key fundamental factors in intrinsic multiples Among the fundamental factors that make up each intrinsic (or theoretical) multiple in relative valuation, the key critical factor is as follows.   Multiples Main Fundamental Factor PER Expected growth rate in EPS EV/EBITDA Reinvestment rate […]

What is PSR? What companies you can apply it to?

Valuation for a growing or venture firm with a deficit or under capital erosion   Why analysts use PSR? PSR is the stock price divided by sales. It is a good multiple to apply to a new technology or a venture firm that has grown in sales but are not making profits yet. You can […]

PBR Valuation of Telecom Companies via Regression

Stock valuation of Telecom companies through PBR regression analysis   Value investors have traditionally chosen stocks with low PBR. It is said that Benjamin Graham, author of “The Intelligent Investor” considered stocks with PBR of less than 2/3 as one of the investment criteria.   One of the ways to use PBR is to compare […]

PBR and Evaluating the Stock Price of Tesla and Toyota

PBR (Price to Book Value Ratio) refers to how many times the market evaluates about the book value of equity for a company. The market will trade it at a higher price when it expects the company to generate more cash flows with equity capital in the future. Suppose company A and company B have […]

EV/EBITDA, Private company valuation – DELL’s MBO

Case: Michael Dell’s MBO of Dell Computer Michael Dell founded Dell Computer in 1984. At his age of 27, in 1992, he grew the company into one of the Fortune 500 companies. In 2004, Michael withdrew from management for a time because of declining performance. However, the board of directors brought him back as CEO […]

EV/EBITDA, Distinction between EV and Equity Value

Enterprise Value vs Equity Value From time to time, the term of enterprise value or equity value is used without distinction. Are they the same meaning? Or different? Let’s look at the following analogy to understand the difference between the two easily.   There are two equally priced flats in London as follows.     […]

Apple’s PER of 36, Over or Undervalued? Use of PEG

Case: Companies in the US home electronics sector   Figure 1: Six companies in the US home electronics industry   The table above shows the market cap and PER of the six companies in the US home electronics sector as of August 27, 2020. Xiaomi has the highest PER while Panasonic has the lowest. Apple, […]

Judging the Level of Stock Price by using an Intrinsic PER

We often try to judge whether a stock price is over or undervalued using PER alone. However, it could make an error when, without the fundamental factors, evaluating the price only with PER. Suppose that there are two companies, A and B, which have a similar business, have a PER of 10 and 20, respectively. […]

PER and Valuation of a Private Company – Case of Dyson

Dyson is a British private technology company founded in the UK in 1991 by James Dyson. It designs and manufactures home appliances such as vacuum cleaners, air purifiers, hairdryers, bladeless fans, heaters and lighting. It is a global company expanded to Europe, Asia, and North America. We will value Dyson’s equity value using PER.   […]

Use of Relative Valuation and Selection of Peer Group

The Use of Relative Valuation Relative valuation can be used to value both private and listed companies.     Case 1: A private company may not have a share price in the market. In this case, you can select comparable listed companies to value it using their multiples as follows.     Case 2: Upon […]

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