Equity Valuation Using Multiples: An Empirical Investigation

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Notations and abbreviationsPrice and valuenet debtb Book value of net debtequityp Stock price / market value of common equityentityp Market value of common equity plus book value of net debtnet debtp Market value of net debtequityv <strong>Equity</strong> value / intrinsic value of common equityentityv Entity value / intrinsic value of common equity plus net debtVariables used to construct multiples 3AIABDEEBITEBITDAEBTEVGIICKCR&DOCFPSATAAmortization of intangible assetsBook value of common equity(Ordinary cash) dividendEarningsEarnings before interest and taxesEarnings before interest, taxes, depreciation, and amortizationEarnings before taxes / pre-tax incomeentityEnterprise value (equivalent to p )Gross incomeInvested capitalKnowledge costsR&D expendituresOperating cash flow / cash flow from operating activitiesequity(Stock) price / market capitalization (equivalent to p )Sales / revenuesTotal assets3 For more details, see Appendix C.
Notations and abbreviationsXVIIAdditional abbreviationsAEAbnormal earningsAEG Abnormal earnings growthCAPEX Capital expendituresCAPM Capital asset pricing modelch. Chapter / -sDCF Discounted cash flow / -sDDM Dividend discount modelDSDatastreame.g.Exempli gratia (for example)EMH Efficient market hypothesisEPS Earnings per shareet al. Et alii (and others)EUEuropean UnionEVA Economic Value AddedFASB Financial Accounting Standards BoardFCF Free cash flow / -sFFIG Fama and French industry groupingsFTSE Financial Times Stock ExchangeGAAP Generally Accepted Accounting PrinciplesGGM Gordon growth modelGICS Global Industry Classification StandardsHSG University of St.GallenI/B/E/S Institutional Brokers Estimate Servicei.e.Id est (that is)IAS International Accounting StandardsIASB International Accounting Standards BoardICB Industry Classification BenchmarkIFRS International Financial Reporting StandardsIPO Initial public offeringISIC International Standard Industrial ClassificationLBO Leveraged buyout
Page 1 and 2: Equity Valuation Using Multiples:An
Page 4 and 5: IVForewordframework. Schreiner demo
Page 6 and 7: VIPrefacement from my friends, whic
Page 8 and 9: Brief contents1 Introduction ......
Page 10 and 11: ContentsForeword...................
Page 12 and 13: XIIContents4.5 Actual valuation....
Page 14 and 15: List of figures 1Figure 1.1: Valuat
Page 18 and 19: XVIIINotations and abbreviationsM&A
Page 20 and 21: 2 Introductiongroup multiples must
Page 22 and 23: 4 Introductionexpenditures, amortiz
Page 24 and 25: 6 Introductiontion, therefore, aims
Page 26 and 27: 8 Introduction• Research question
Page 28 and 29: 10 Introductionscope of the solutio
Page 30 and 31: 12 IntroductionFigure 1.2: Outline
Page 32 and 33: 14 Literature reviewto earnings gro
Page 34 and 35: 16 Literature reviewserved market v
Page 36 and 37: 18 Literature reviewmultiple for ea
Page 38 and 39: 20 Literature reviewthe other. Chen
Page 40 and 41: 3 Theoretical foundationsShareholde
Page 42 and 43: 24 Theoretical foundationsferred to
Page 44 and 45: 26 Theoretical foundationswherev is
Page 46 and 47: 28 Theoretical foundationsholders a
Page 48 and 49: 30 Theoretical foundationsOhlson (2
Page 50 and 51: 32 Theoretical foundationsget firm'
Page 52 and 53: 34 Theoretical foundationsIn order
Page 54 and 55: 36 Theoretical foundationsRI D Bequ
Page 56 and 57: 38 Theoretical foundationsFigure 3.
Page 58 and 59: 40 Theoretical foundationsThe loose
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Page 62 and 63: 44 Theoretical foundationsability c
Page 64 and 65: 46 Theoretical foundationsposure to
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4 Comprehensive multiples valuation
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50 Comprehensive multiples valuatio
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5 Design of the empirical studyThe
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86 Design of the empirical studytio
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88 Design of the empirical studypir
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90 Design of the empirical study5.3
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92 Design of the empirical studyCha
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94 Design of the empirical studyand
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96 Design of the empirical studyass
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6 Empirical resultsThe following ch
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100 Empirical resultsous multiples
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102 Empirical resultsvalue multiple
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104 Empirical results6.1.3 Knowledg
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106 Empirical resultsknowledge-rela
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108 Empirical resultsTable 6.4: Per
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110 Empirical results6.1.5 The effe
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112 Empirical resultsThe second tes
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114 Empirical results6.2.1 Industry
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116 Empirical resultsExamination of
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118 Empirical resultscoefficients a
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120 Empirical results• The simple
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122 Empirical resultsTable 6.11: Co
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124 Empirical resultshowever, lapse
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126 Empirical resultsoped equity ma
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128 Conclusionmultiples, in particu
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130 Conclusion7.3 Research outlookE
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132 Appendix A: ICB industry classi
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134 Appendix A: ICB industry classi
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136 Appendix B: U.S. evidenceEquity
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138 Appendix B: U.S. evidencePerfor
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146 Appendix B: U.S. evidenceIndust
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148 Appendix B: U.S. evidenceFactor
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150 Appendix B: U.S. evidenceTime s
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152 Appendix C: Definition of varia
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ReferencesAboody, D., 2006. Financi
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156 ReferencesBernard, V.L., Thomas
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158 ReferencesDamodaran, A., 2001.
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160 ReferencesFama, E.F., 1976. Fou
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162 ReferencesGuo, R.-J., Lev, B.,
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164 ReferencesLev, B., Nissim, D.,
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166 ReferencesO’Hanlon, J., Peasn
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168 ReferencesRoss, S.A., Westerfie
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Curriculum VitaeName:Born:Andreas S
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Equity Valuation Using Multiples: An Empirical Investigation

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