Summary
Our research focuses specifically on the methodology to be applied to improve the relevance of the multiples-based valuation method regarding the identification of the most relevant multiples (i.e., that reduce the relative absolute valuation error within any industry-based peer group). In line with prior empirical studies, our results confirm that Enterprise Value multiples based on EBIT and EBITDA perform better, compared to Sales and Capital Employed, and that multiples based on forward-looking EBIT and EBITDA are more relevant compared to corresponding actual earnings. In the absence of forward-looking earnings, available at the date of valuation, our study shows that EBITDA multiples provide better estimates than EBIT multiples do. Beyond these general results, the approach implemented in our research can be easily reproduced by practitioners (e.g., financial analysts, M&A advisors, independent appraisers) to identify case-by-case the multiples that are the most relevant within any industry-based peer group.
Valuation Using Industry Multiples: How to Choose the Most Relevant Multiples
PDF, Size: 313 KB
Copyright American Society of Appraisers
The information contained in this product is based on content obtained by ASA from sources considered to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. BVR and ASA accept no liability for the use of such information which is provided "AS IS" and with no warranties, express or implied.