- Welcome to Relative Valuation!
Welcome to "Valuation Multiples!" The module introduces you to the most popular valuation approach among practitioners: Relative Valuation. This introductory section motivates the topic and explains the logic of the module.
The main learning goals of this module are:
- Get to know valuation multiples, the practically most relevant valuation method.
- Understand the key success factors of using relative valuation.
- Use multiples for enterprise valuation and equity valuation.
- Know key implementation challenges and their solutions.
- Get to know the Price-Earnings (PE)-Ratio and the implicit assumptions we make when using it.
This section gives a brief introduction to relative valuation and presents the basic idea behind this simple yet powerful valuation method.Book: 1Quiz: 1
This section briefly shows the relation between enterprise value and equity value and shows how we can use relative valuation to derive these values. It also takes a closer look at what "enterprise value" actually is.Book: 1Quiz: 1
- In this section, we address the three key challenges we face when conducting relative valuation: How to pick multiples? Which ones are the "right" comparables? And what are comparable valuation situations?Book: 1Quiz: 1
This section takes a closer look at the P/E ratio, the most popular valuation multiple among financial analysts. We show how to derive the P/E ratio from a simple valuation model. This allows us to better understand the (implicit) assumptions we make when working with the P/E ratio. We also see that many other multiples are a function of the P/E ratio.Book: 1Quiz: 1