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Most relevant multiples valuation multiples by industry 

Most relevant multiples valuation multiples by industry 

Source publication
Article
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Market multiples are a common tool in the financial community for asset and business valuations. In this article, we aim to analyse the accuracy and the underlying drivers behind valuation multiples as tell as what explains their relative and absolute level. For this we use a European data sample of 400 listed companies.

Citations

... The final price is set through negotiation between the buyer and the seller until convergence on the final transaction price is achieved. Current academic studies have focused on the choice of value drivers, such as the earnings before interest, taxes, depreciation, and amortization (EBITDA), to be considered to improve the relevance of the valuation using "multiples" (Chastenet & Marion, 2015;Harbula, 2009;Nissim & Penman, 2001). ...
Article
Farm transfer is increasingly seen as fundamental to the development of agriculture. One of the major challenges is to assess farm value in the context of an opaque market for farms. We contribute to the scarce literature on farm valuation by empirically applying three valuation methods to the Farm Accountancy Data Network database for France in 2017 and 2018 and for five types of farming. The three methods—the fundamental method, the patrimonial method, and the financial method—are well known for the valuation of companies, but have yet to be implemented widely for farms in the empirical literature. The results show that wine‐growing farms have the highest values on average. Pig and beef farms have high average patrimonial values, reflecting their high capital intensity, but beef farms have the lowest average values calculated with methods based on cash flows, revealing unfavorable market conditions for these farms. The results further reveal that total farm output drives the value upward, but that high farm labor, indebtedness, and age contribute to reducing value. Our findings also highlight that, in practice, the differences in values across methods may be substantial.
... In contrast, for emerging markets, studies conclude superiority of equity value multiples, explaining the inferiority of enterprise value multiples by the noise being incorporated when the book value of debt is used as a proxy for its market value [3,4]. For European markets, the results are somewhat inconsistent, on the one hand concluding superiority of enterprise value multiples [5] and, on the other hand, finding equity value multiples do dominate [6,7]. ...
... On a sectoral basis, results of prior research are consistent in that different multiples are most accurate across industry sectors (for the U. S. market [13,15,19], for the European market [5,20] and, for emerging markets [3,4,21]), but with varying relative superiorities that may be again attributed to peer pool sampling. ...
... Despite the superiority of forward trading multiples [1,5,7,8,10,11,13,15,[53][54][55][56], since this study emphasizes on transaction multiples employing data from the market for corporate takeovers of private firms, I employ trailing multiples for at least three reasons: First, forecast value drivers are often simply not available for private firms as they are for public companies. Second, even if forecast value drivers are available, they often lack reliability or cannot be verified in a reliable manner, respectively. ...
... 2. Codau (2013), Damodaran (2012), M. D. Graham (1990), Harbula (2009) From the survey, it was found that (a) a majority of professional valuation practitioners generally use informed judgement to reconcile differences in value between the Three Methods, EI streams, and value-hierarchy levels; (b) a minority of practitioners use some generally unspecified mathematical analytics along with informed judgement to facilitate this goal; and (c) a majority of practitioners consider (but do not seem to solely depend upon) averaging to reconcile differences in going-concern business valuations derived from the Three Methods. ...
... asset utilization versus the industry (relatively higher asset utilization commands higher multiples).(p. 20) Similar toHarbula (2009), Codau (2013 developed a study "to determine the factors that influence the valuation multiples used in the market approach in valuing companies" (p. 391). ...
Thesis
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This thesis examines the prevalent informed judgement and averaging practice mechanisms used to reconcile material differences in going-concern business valuation indications derived from multiple business valuation methods as applied within and between separate economic income streams and value hierarchy levels. This study introduces an Alternative Practice Mechanism (APM) that enables in-sync valuation indications between different methods and reconciles differing value-hierarchy levels.
... They show that, in addition to risk and growth, analysts applying market multiples valuation should take into account different variables such as cost structure, working capital, and the required investment costs. Harbula (2009) analyzes market multiples as a tool for evaluation of assets. He explores the accuracy and the main drivers of multiples' valuation along with their relative and absolute level. ...
Article
Full-text available
The article provides an overview of contemporary empirical studies of the relationship between country characteristics and valuation multiples. It describes the existing approaches to establishing the accuracy of multiples, as well as the comparison of the empirical evaluations obtained by different researchers. This article is intended to analyze the influence of the estimated multiples on the accuracy of differences in the country characteristics. The article examines the impact of the GDP growth on the accuracy of determining the " price/earnings " multiples for the comparative valuation of companies on the European markets. An econometric study presented in this paper allows making a conclusion about the need to find justification for the differences in the multiples and mitigation of the differences. It also allows assessing the dependence of the " price/earnings " multiple on the GDP growth rate by European countries. The article explains the accounting of GDP growth as one of the methods of mitigating the differences in the variables and P/E multiples in different countries.
... The study covered the following companies: In assessing the effectiveness of multiple-based methods, the three most common solutions were taken into account, i.e. the P/E (Price/Earnings), P/BV (Price/Book Value) and EV/EBITDA (Enterprise Value/Earnings Before Interest&Taxes, Depreciation and Amortization) multiples. The choice of multiples is justified not only by their popularity in valuation practice but also by empirical research proving their effectiveness in the valuation of companies in the broadly understood real estate sector (HARBULA, 2009). The study covered the years 2010-2013. ...
... In the available literature, one can find a number of studies on the factors differentiating the level of the given multiple among enterprises operating in the same industry (BEAVER, MORSE 1978). In order to increase the accuracy of valuation, the P/E and P/BV multiples, including their determinants recognized as having a significant influence on their level, were estimated (HARBULA 2009 andCHENG, MCNAMARA 2000). In the case of the P/E multiple, the structure of the company's financing (the company's debt to equity ratio) was taken into account, vol. ...
Article
Full-text available
The enterprise's market value is one of the main parameters characterizing the condition of the business entity, its development prospects and market position. It is an important criterion considered by managers and investors. Among the wide group of business valuation methods, multiple-based methods of valuation can be distinguished. Their undeniable advantage is the relative simplicity and speed of carrying out the process of valuation. An important condition for their application is a sufficiently developed and mature capital market. The aim of the paper is to present the potential of the application of multiple-based methods in the valuation of real estate development companies. The analysis will be conducted on the basis of the experience of the Polish market.
... They show that, in addition to risk and growth, analysts doing market multiple valuations need to take into account differences in variables such as cost structure, working capital, and capital expenditure requirements. Harbula (2009) analyses market multiples as a tool to valuate assets. He examines the accuracy and the main drivers of valuation multiples and explains their relative and absolute level. ...
... The studies of Harbula (2009), Damodaran (2012), Fernandez (2013) and others have noted the priority in the accuracy or explanatory power of the multiples. Specific results are different due to the sample firms, sector of industry, market and time of study. ...
Article
Full-text available
Market multiples are a tool for estimation corporate value. These tools are expressed as temporal dynamics and differences in the markets, sectors, industries, firms. Despite their great practical application, a number of problems remains which continue to be debated. This article examines the explanatory power of multiples, and makes a comparison of multiples for the technology sector with the market as a whole, and multiples for the technology sector of Emerging Markets are established within the ranking, most fully explaining the value of stocks using an approach that ensures mitigating the differences in multiples from basic variables. © 2015, Canadian Center of Science and Education. All rights reserved.
... They show that, in addition to risk and growth, analysts doing market multiple valuations need to take into account differences in variables such as cost structure, working capital, and capital expenditure requirements. Harbula (2009) analyses market multiples as a tool to valuate assets. He examines the accuracy and the main drivers of valuation multiples and explains their relative and absolute level. ...
... The studies of Harbula (2009), Damodaran (2012), Fernandez (2013) and others have noted the priority in the accuracy or explanatory power of the multiples. Specific results are different due to the sample firms, sector of industry, market and time of study. ...
... According to Table 1.6, PER, EBITDA, profits after tax were most volatile when compared to equity value. Harbula (2009) has provided evidence on the valuation errors (mean, median) of the multiples valuation used in certain industry sectors in the European markets. The valuation error mean is quite significant (≥14 percent) for most of the following industries: real estate, building ...
... For example, when the operational margin, assets, and shareholders' expectations do not change, a growth in revenue will create shareholder value. Revenue growth can be achieved by acquiring new customers Source: Harbula (2009) (marketing and sales channeling) and by retaining and growing the number of current customers (through continuous product and service innovation, account management, and cross-selling). Revenue growth is the result of price realization, demand and supply management, and price optimization. ...
Book
Measuring shareholder value has become crucial in the current economic environment, especially following the consistent pressure from institutional shareholders on companies to create shareholder value in an adverse economic environment. Maximizing the company’s value will make the company less appealing to hostile takeovers. Takeovers are a capital market mechanism designed to control the conflicts of interest between shareholders and managers of the company. In this study, we will examine the best methods used in measuring shareholder value, and furthermore explore the process of shareholder value creation in the years prior and following the creeping takeover of Ivanhoe Mines by Rio Tinto Plc. We have based our study on data and ratio analytics from ThomsonONE (Reuters), information that is publicly available through press releases, analyst coverage, and financial news. Our study includes an in-depth analysis of the creeping takeover of Ivanhoe Mines by Rio Tinto Plc.
Article
La tesis de este trabajo es que las reglas establecidas en la legislación chilena sobre la determinación del precio de las acciones en el derecho de retiro son disfuncionales con respecto al interés tutelado. En cuanto al valor en libros, la evidencia empírica muestra que, en promedio, el precio de la acción equivale a un 53% del precio promedio bursátil. Sin embargo, esta última forma de cálculo tampoco está exenta de distorsiones. A fin de mitigar los problemas de gobierno corporativo asociados al ejercicio del derecho de retiro se propone adoptar como forma de determinación del precio el “valor ajustado”.