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Valuation deviations in the compilation of industry multiples on American companies
[Odchylky ocenění při sestavení odvětvových multiplikátorů na amerických společnostech]

Author

Listed:
  • Martin Husák
  • Petr Marek

Abstract

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.

Suggested Citation

  • Martin Husák & Petr Marek, 2021. "Valuation deviations in the compilation of industry multiples on American companies [Odchylky ocenění při sestavení odvětvových multiplikátorů na amerických společnostech]," Oceňování, Prague University of Economics and Business, vol. 14(4), pages 18-37.
    • Handle: RePEc:prg:jnloce:v:14:y:2021:i:4:id:2021_4_02:p:18-37
    DOI: 10.18267/j.ocenovani.268
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    References listed on IDEAS

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    1. Alford, Aw, 1992. "The Effect Of The Set Of Comparable Firms On The Accuracy Of The Price Earnings Valuation Method," Journal of Accounting Research, Wiley Blackwell, vol. 30(1), pages 94-108.
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    3. Yong Keun Yoo, 2006. "The valuation accuracy of equity valuation using a combination of multiples," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 5(2), pages 108-123, April.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Valuation; Market approach; Multiples; Market multiples; Valuation deviations; P/E; EV/EBITDA; Oceňování; Metoda tržního porovnání; Multiplikátory; Tržní násobky; Odchylky ocenění;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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