Ltd an affiliate of ubs ag ubs ag its subsidiaries branches and affiliates are seoul national. The company valuation of ubs group ag according to these metrics is consistent with the market valuation of its sector. Ubs valuation multiples primer by wallstreetprep on scribd. A primer 2001, ubs warburg, 2001 business valuation 101, theresa shonat. Ubs global research valuation series discounted cash flow analysis august 1997 4 overview used by bankers and accountants, but rarely by analysts discounted cash flow dcf valuations are numerically intensive and, therefore, their use only became commonplace when lowcost desktop computing was widely available in the 1980s. The pearnings ntm ratio of ubs group ag is significantly lower than its historical 5year average. A business valuation might include an analysis of the companys management, its capital structure, its future earnings prospects, or the market value of its assets. Msci acwi pme vc has outperformed public markets in 15 out of 22 vintage years between 1993 and 2014 10 10 30 50 70 90 110 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 20 i r r in % cambridge associates us vcpooledirr russell 2000 pme source. He derives intrinsic multiples from fundamental equity valuation models and explains why some firms deserve higher or lower multiples than its peers. Nyu lesson 07 valaution intro multiples ev value drivers. A recent survey found that the two most popular multiples are pricetoearnings pe and evebitda. Strategic advice on company sales, mergers and acquisitions.
The company valuation of ubs group ag according to these metrics is above the market valuation of its sector. On the asset side you have financial assets earning some sort of interest. Valuation multiples are supposed to be simplistic and give you an idea of what your business is worth. Valuation multiples of publicly traded fintech companies remain elevated relative to broader markets and financials. This assumes that a ratio comparing value to some firmspecific. Transaction multiples are a type of financial metrics used to value a company. Applications of market multiples, such as pricetoearnings or markettobook value ratios. Based on the weaknesses of the standard multiples valuation method, schreiner systematically develops a list of criteria for the selec.
With accounting, other sources may not give much detail, but at least the information is correct. Therefore, salesrelated multiples have an added factor, profitability, to analyze. They attempt to capture many of a firms operating and financial characteristics e. The purpose of this paper is to find out which valuation methods are available for valuing metals and mining companies and explain why these companies are valued this way in practice.
The secret lies in identifying a similar peer group of companies relative and learn how much are they valued. Multiples are used in research reports and stock recommendations of both buyside. The current company valuation of ubs group ag is therefore way below its valuation average over the last five years. Value focus fintech industry second half 2016 2016 can be characterized as a cool down period for fintech. Multiples is a term widely used in lots of valuation theories. We also consider forwardlooking measures derived from analysts forecasts of eps earnings per share and longterm growth in eps, such as 2year out consensus eps. A target multiple is the maximum multiple of earnings, ebitda, etc that you could pay, given certain underlying value drivers, and receive a fair return on your investment.
The process of valuation using multiples involves certain steps and. A timely update to the global bestselling book on investment banking and valuation in the constantly evolving world of finance, a solid technical foundation is an essential tool for success. But you need to get your head around this to understand the valuation game with prospective investors. The paper takes the reader through different stages of metals and mining companies from mineral exploration to mine production and provides an overview of. Heres an intuitive perspective on valuing financial services firms.
Unfortunately, most guides, textbooks, and websites do a very poor job of explaining these topics. Without understanding the multiples and what they mean, you are only betting on the qualitative aspect or the story of the stock, without understanding. In economics, valuation using multiples, or relative valuation, is a process that consists of. The challenges of private equity investment valuation. Equity valuation using multiples by jing liu, doron nissim. Valuation multiples are the quickest way to value a company, and are useful in comparing similar companies comparable company analysis. We assume that a peer group of comparable firms for which the market value is available can be used as a proxy for the valuation of the company we are evaluating right now. Fortunately, many years ago the venerable ubs wrote a great broker report which gets into valuation multiples in a great level of detail. In australia the dcf and the market approach using multiples are most used too. Almost 85% of equity research reports are based upon a multiple and. The multiple is a ratio, composed of two variables. Questions on equity value, enterprise value, and valuation metrics and multiples are some of the most common ones in interviews. Since both companies have identical cash earnings they have the same value and should trade at the.
Ubs warburg, 1 finsbury avenue, london, ec2m 2pp, uk phone. Hotel valuation, like all real estate valuation, must be seen in the context of establishing a point estimate that represents the value of a unique, illiquid asset in an environment with noisy and conflicting information. Valuation multiples are a key component of equity analysis their successful use depends upon a clear understanding of the factors that drive them objectives of this presentation. Valuation multiples multiples analysis multiples analysis involves valuing a company with the use of a multiple. This gives rise to the use of multiple approaches that must be reconciled. Multiples and their valuation accuracy in european equity markets andreas schreiner and klaus spremann august, 2007 we would like to thank david aboody, thomas berndt, jan bernhard, pascal gantenbein, sebastian lang, jing liu, jacob thomas, and seminar participants at ucla, university of innsbruck, university of. Among the different methods, transaction multiples play a very different role, as they make the buyer aware of the value of a particular.
For instance, if we want to estimate the fair value of ubs in a. February 2018 business valuation update 3 market multiple adjustments. Relative valuation accuracy of corporate valuation using multiples. This can be an advantage when it is important that the price re.
Revenue for accounting, tax preparation, bookkeeping, and payroll services in the u. Eps, return on equity roe, book value bv, p e, p bv, and so on. Fundamental principles of relative valuation 637 chapter 18. Due to the fastpaced nature of this world, however, no one was able to take the time to properly codify its lifebloodnamely, valuation and dealmaking. If you are preparing for interviews and want to be prepared for questions like which multiples are best to value a bank. Discounted cash flow dcf analysis pricing tips and tools.
Therefore, similarity based on things that drive both risk weighted average cost of capital wacc and growth. The multiples approach is a valuation theory based on the idea that similar assets sell at similar prices. Based on the valuation of its peer group, we can arrive at the value of the company under consideration. Guide to understanding valuation multiples in valuation. We examine the valuation performance of a comprehensive list of pricing multiples. Multiples are the proportion of one financial metric i. Valuation multiple equity and enterprise valuation mutiples. Instead of traditional metrics lik e revenue and ebitda, you list the metrics and multiples that are relevant to a bank.
Our report analyzes, by subindustry and geographic location, the deal volumes, ebitda valuation multiples paid, and stock prices for. Additionally there is a pdf attached about valuing financial services firms from nyu stern. There are, to the best of the authors knowledge, four approaches to value banks. I also study the valuation accuracy of the three most widely used multiples used within these methods, the. On the faculty of the hotel school since 1988, he has devoted his career to research and teaching in the. Measuring and managing the value of companies, 6th edition. This includes company sales, succession arrangements and spinoffs as well as private or public acquisitions and mergers. Practical issues in valuation of private and familyowned. The first graph relates a survey carried out in 2012 by bcg ubs while the second graph summarizes a latest survey released in 2016 by kpmg. Reprinted with permissions rom business valuation resources, llc in general, ebitda multiples are largely a function of growth and risk, whereas sales multiples are a function of growth, risk, and profitability. This ubs report published over a decade ago breaks down the fundamentals underlying multiples. Multiples analysis compares the companys multiple with that of a peer company or are financial measurement tools that evaluate one financial metric as a ratio of another, in order to make different companies more comparable. Valuation and accounting research 2 3 ubs warburg standard valuation multiples price earnings ratio price to cash earnings dividend yield price to book ev to sales ev to ebitda ev to ebit ev to operating free cash flow ev to invested capital equity multiples enterprise value.
The use of business valuation methods in africa, europe and australia. However, they did not benefit as much as the financial sector from the post. Fuer homepage valuation of metals and mining companies. Transaction multiples advantages, disadvantages and analysis. As of last week, i was sure that every banker on the street knows about the famous ubs valuation multiples primer.
Get a grip on grp reprinted with permissions rom business valuation resources, llc in general, ebitda multiples are largely a function of growth and risk, whereas sales multiples are a. A valuation technique in which the market value of the shares is estimated by comparing the subject company to companies which have been sold recent genuine offers or whose ownership interests are publicly traded when there is a liquid and active market. Sectorspecific multiples while earnings, book value and revenue multiples are multiples that can be. The valuation model proposes an explicit methodology to evaluate the duration of these accounts.
Even if carried out in two different times, the two surveys show the same outcome. We find that multiples derived from forward earnings explain stock prices remarkably well for most firms. A primer 2001,ubs warburg, 2001 business valuation 101, theresa shonat. To find good valuation multiples, you must find wellsuited comparable companies multiples are driven by 2 things. Traditional valuation multiples are often used to calculate terminal value. Value focus fintech industry business valuation and. The advantage of using revenue multiples, however, is that it becomes far easier to compare firms in different markets, with different accounting systems at work, than it is to compare earnings or book value multiples. Multiples and their valuation accuracy in european equity. This document explains how to calculate and use multiples commonly used in equity analysis. The only primer youll ever need on valuation multiples. If you are looking for more information on valuation multiples, check out this pdf excellent primer published by ubs warburg. A primer november 2001 3 ubs g wr bu r a an introduction to multiples this document is intended to be a reference manual for the calculation of commonly used valuation multiples. What the primer does an especially good job is the derivations of the target multiples in the appendix.
The valuation of a business is the process of determining the current worth of a business, using objective measures, and evaluating all aspects of the business. This distinction is a point of emphasis throughout this report. It is all relative multiples, comparables and value. The market imperative relative valuation is much more likely to re. A valuation multiple is simply an expression of market value relative to a key statistic that is assumed to relate to that value. Since enterprise value ev equals equity value plus net debt, ev multiples are calculated using denominators. Wilson, cfa, cba february 19, 20 mercer capital depository. Equity valuation using multiples 7 taxes, depreciation, and amortization, and historical accrualbased measures, such as sales, earnings, and book value of equity. Valuation multiples approach is also known as relative valuations trading multiples. Valuation using multiples often known as relative valuation is a technique that is used for making an estimate of the value of an asset and this is done by making a comparison of the assets value with the values of similar assets or comparables after analyzing the market process of valuation using multiples. We explain how multiples are calculated and discuss the different variations that can be employed. Valuation multiples are a key component of equity analysis.
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