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| Author: | Lie, E. Lie, H. J. |
| Title: | Multiples Used to Estimate Corporate Value |
| Journal: | Financial Analysts' Journal
2002 : MAR-APR, VOL. 58:2, p. 44-55 |
| Index terms: | COMPANIES CORPORATE PLANNING ESTIMATION ANALYTICAL REVIEW |
| Language: | eng |
| Abstract: | The paper evaluate various multiples practitioners use to estimate company value. It founded, first, that the asset multiple (market value to book value of assets) generally generates more precise and less biased estimates than do the sales and the earnings multiples. Second, although adjusting for companies' cash levels does not improve estimates of company value, using forecasted earnings rather than trailing earnings does. Third, the earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple generally yields better estimates than does the EBIT multiple. Finally, the accuracy and bias of value estimates, as well as the relative performance of the multiples, vary greatly by company size, company profitability, and the extent of intangible value in the company. |
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