Oceňování 2021, 14(4):18-37 | DOI: 10.18267/j.ocenovani.268

Valuation deviations in the compilation of industry multiples on American companies

Martin Husák1, Petr Marek2
1 Ing. Martin Husák, doktorand, Katedra financí a oceňování podniku VŠE Praha
2 Prof. Ing. Petr Marek, CSc., Katedra financí a oceňování podniku VŠE Praha

The article is devoted to the issue of industry market multiples in valuing companies in terms of accuracy. A total of 1 266 US companies traded on regulated capital markets in 2010-2019 were selected for analysis. The main goal is to determine own values of the six most commonly used multiples for the US market, the median and the arithmetic average, and then to investigate deviations in these values in terms of company size, industry, company size in industry, time and values of Damodaran multiples. The analysis shows that it is more appropriate to use the median of industry multiples over a simple arithmetic average, the method of multiples for larger companies is not clearly more accurate, entity and equity multiples also do not show clear results in terms of accuracy. If we use our own industry multiples, it is possible to achieve higher accuracy of valuation than when using multiples of Damodaran. The multiples of the larger companies in the industry do not reach convincingly higher values than the median of the industry and also that the development of the multiples varies significantly over time.

Keywords: Valuation; Market approach; Multiples; Market multiples; Valuation deviations; P, E; EV, EBITDA
Grants and funding:

Článek je zpracován jako jeden z výstupů výzkumného projektu Fakulty financí a účetnictví na VŠE v Praze "Nové výzvy Corporate Finance v České republice 2.0" registrovaného u Interní grantové agentury VŠE v Praze pod registračním číslem F1/58/2021 a jako jeden z výstupů výzkumného projektu Fakulty financí a účetnictví VŠE, který je realizován v rámci institucionální podpory VŠE IP100040. Podkladem k článku je diplomová práce Ing. Martina Husáka, vedená prof. Ing. Petrem Markem, CSc., obhájená na Katedře financí a oceňování podniku VŠE Praha v červnu 2021.

JEL classification: G32

Published: April 20, 2022  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Husák, M., & Marek, P. (2021). Valuation deviations in the compilation of industry multiples on American companies. Oceňování, 14(4), 18-37. doi: 10.18267/j.ocenovani.268
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. ALFORD, A. W. (1992): The Effect of the Set of Comparable Firms on the Accuracy of the Price-Earnings Valuation Method. Journal of Accounting Research, 1992, roč. 30, č. 1, s. 94-108. Go to original source...
    2. BAKER, M. - RUBACK, R. S. (1999): Estimating Industry Multiples. [online]. Cambridge, Harvard Business School, 1999, [cit. 10. 4. 2021], <https://www.hbs.edu/faculty/Pages/download.aspx?name=EstimatingIndustry.pdf>.
    3. BERK, J. - DEMARZO, P. (2014): Corporate Finance. Stanford, Stanford University / Pearson Education, 2014. ISBN 978-0-13-299247-3.
    4. BUDSKÝ, P. - Dvořák, J. (2017): Průměrné multiplikátory odvětví a jejich komparace s daty z burzy. Oceňování, 2017, roč. 10, č. 4, s. 3-13.
    5. Capital IQ (2021): S&P Capital IQ Platform. [elektronický zdroj]. New York, S&P Global, 2021. Elektronická databáze.
    6. DAMODARAN, A. (2018): The Dark Side of Valuation. Valuing Young, Distressed, and Complex Businesses. New York, Stern School of Business at New York University / Pearson FT Press, 2018. ISBN 978-0134854106.
    7. DAMODARAN, A. (2021): Multiples - Enterprise Value Multiples by Sector (US). Multiples - PE Ratio by Sector (US). Multiples - Price and Value to Book Ratio by Sector (US). Multiples - Revenue Multiples by Sector (US). [online], New York, Stern School of Business at New York University, 2021, [cit. 10. 4. 2021], <http://pages.stern.nyu.edu/~adamodar/>
    8. DECHOW, P. M. - HUTTON, A. P. - SLOAN, R. G. (2000): The Relation between Analysts' Forecasts of Long-Term Earnings Growth and Stock Price Performance Following Equity Offerings. Contemporary Accounting Research, 2000, roč. 17, č. 1, s. 1 - 32. Go to original source...
    9. DEMIRAKOS, E. G. - STRONG, N. C. - WALKER, M. (2010): Does Valuation Model Choice Affect Target Price Accuracy? European Accounting Review, 2010, roč. 19, č. 1, s. 35-72. Go to original source...
    10. DENG, M. - EASTON, P. - YEO, J. (2010): Another Look at Enterprise and Equity Valuation Based on Multiples. [online]. New York, Social Science Research Network, 2010, [cit. 10. 4. 2021], <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1462794>.
    11. EBERHART, A. C. (2004): Equity Valuation Using Multiples. Journal of Investing, 2004, roč. 13, č. 2, s. 48-54. Go to original source...
    12. GROYSBERG, B. - HEALY, P. - CHAPMAN, C. (2008): Buy-Side vs. Sell-Side Analysts' Earnings Forecasts. Financial Analysts Journal, 2008, roč. 64, č. 4, s. 25-39. Go to original source...
    13. HENSCHKE, S. - HOMBURG, C. (2009): Equity Valuation Using Multiples: Controlling for Differences Between Firms. [online]. New York, Social Science Research Network, 2010, [cit. 10. 4. 2021], <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1270812>. Go to original source...
    14. KAPLAN, N. S. - RUBACK, R. S. (1995): The Valuation of Cash Flow Forecasts: An Empirical Analysis. Journal of Finance, 1995, roč. 50, č. 4, s. 1059-1093. Go to original source...
    15. KOLLER, T. - GOEDHART, M. - WESSELS, D. (2005): Valuation Measuring and Managing the Value of Companies. Hoboken, John Wiley & Sons, 2005. ISBN 978-0-471-70218-4.
    16. LIE, E. - LIE, H. J. (2002): Multiples Used to Estimate Corporate Value. Financial Analysts Journal, 2002, roč. 58, č. 2, s. 44-54. Go to original source...
    17. LIU, J. - NISSIM, D. - THOMAS, J. K. (2002): Equity Valuation Using Multiples. Journal of Accounting Research, 2002, roč. 40, č. 1, s. 135-172. Go to original source...
    18. MAŘÍK, M. aj. (2018): Metody oceňování podniku: proces ocenění, základní metody a postupy. Praha, Ekopress, 2018. ISBN 978-80-87865-38-5.
    19. NEL, W. S. - BRUWER, B. W. - le ROUX, N. J. (2013): Equity-And Entity-Based Multiples in Emerging Markets: Evidence from the JSE Securities Exchange. Journal of Applied Business Research, 2013, roč. 29, č. 3, s. 829-852. Go to original source...
    20. SCHREINER, A. - SPREMANN, K. (2007): Multiples and Their Valuation Accuracy in European Equity Markets. [online]. New York, Social Science Research Network, 2007, [cit. 10. 4. 2021], <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=957352>. Go to original source...
    21. YOO, Y. K. (2006): The valuation accuracy of equity valuation using a combination of multiples. Review of Accounting and Finance, 2006, roč. 5, s. 108-123. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content