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- What is Equity Value - What is Enterprise value - Comparing Equity Value and Enterprise Value - Equity Value Multiples - Enterprise Value Multiples - How to determine Overvalued or Undervalued using Multiples - Preparing Enterprise and Equity Value Multiple Comps What is Equity Value? Equity Value is simply the Value of a firm’s equity i.e. the market Capitalization of the Firm. It can be calculated by multiplying the market value per share by the total number of shares outstanding. Piv txwv, let’s assume Company A has the following characteristics: Based on the formula above, you can calculate Company A’s Equity value as follows: Txawm li cas los, in most cases this is not an accurate reflection of a company’s true value. What is Enterprise Value? Enterprise value considers much more than just the value of a company’s outstanding equity. It tells you how much a business is worth. Enterprise value is the theoretical price an acquirer might pay for another firm, and is useful in comparing firms with different capital structures since the value of a firm is unaffected by its choice of capital structure. To buy a company outright, an acquirer would have to assume the acquired company’s debt, though it would also receive all of the acquired company’s cash. Acquiring the debt increases the cost to buy the company, but acquiring the cash reduces the cost of acquiring the company. - Enterprise Value = Market value of operating assets - Equity Value = Market value of shareholders’ equity Net Debt – Net debt is equal to total debt less cash and cash equivalents. - When calculating total debt, be sure you include both the long-term debt and the current portion of long-term debt, or short-term debt. Any in-the-money (ITM) convertible debt is treated as if converted to equity and is not considered debt. - When calculating cash and equivalents, you should include such balance sheet items as Available for Sale Securities and Marketable Securities, - The market value of debt should be used in the calculation of enterprise value. Txawm li cas los, in practice you can usually use the book value of the debt. Let me explain it with an example. Consider the same company A and an another company B having the same market capitalization. We assume two scenarios, 1 thiab 2. Calculate the EV for Scenario 1. EV for Company A is Market Capitalization ($50 million) + Nqi ($20 million) – Cash and Short term investments ($0) = $70 million. EV for Company B is Market Capitalization ($50 million) + Nqi ($0) – Cash and Short term investments ($0) = $50 million. While both companies have the same market capitalization, the better buy is Company B, or the company with no debt. Now, consider scenario 2 Calculate the EV for Scenario 2. EV for Company A is Market Capitalization ($50 million) + Nqi ($0) – Cash and Short term investments ($5 million) = $45 million. EV for Company B is Market Capitalization ($50 million) + Nqi ($0) – Cash and Short term investments ($15 million) = $35 million. While both companies have the same market capitalization and no debt, the better deal is Company B as you would assume $15 million in cash upon purchase of the company. Equity Value vs Enterprise Value Equity Value vs Enterprise Value Multiples What is Equity Value Multiple? The equity value multiples have both the numerator and the denominator as “Equity” measure. Some of the multiples of Equity value multiples are as per below. Numerator – Equity Value is Price per share that shareholder’s are expected to pay for a single share of the company under consideration Denominator – Operating parameters like EPS, CFS, BV etc equity measures. For example EPS – Earnings per share and it reflects the profit per share that accrues to the shareholders. - PE Multiple – This ‘headline’ ratio is in essence a payback calculation: nws tau hais tseg muaj pes tsawg xyoo’ earnings it will take for the investor to recover the price paid for the shares. Lwm yam uas tau sib npaug, Thaum muab piv rau tus nqe ntawm ob stocks hauv lub sector tib lub investor yuav xum ib lub nrog tus PE tsawg tshaj plaws. - PCF Multiple – It is a measure of the market’s expectations of a firm’s future financial health. This measure deals with cash flow, the effects of depreciation and other non-cash factors are removed. - P/BV Multiple – Useful measure where tangible assets are the source of value generation. Because of its close linkage to return on equity (price to book is PE multiplied by ROE), it is useful to view price to book value together with ROE - P/S Multiple - Price/sales can be useful when a company is loss making or its margins are uncharacteristically low (distressed firms) - PEG Multiple - A ratio used to determine stock’s value while taking into account earnings growth. The enterprise value multiples have both the numerator and the denominator as “Pre Debt” and “Pre-Equity” measure. Some of the multiples of Enterprise value multiples are as per below. What is Enterprise Value Multiples? Numerator – Enterprise Value is primarily a pre-debt and pre-equity measure as EV reflects values both to the Debtors as well as Shareholders’. Denominator – Operating parameters like Sales, EBITDA, EBIT, FCF, Capacity are pre-debt and pre-equity measures. For example EBITDA – Earnings “before” Interest tax depreciation and amortization; this implies that EBITDA is measure before the debtors and shareholders are paid off and likewise. - EV/EBITDA Multiple - Measure that indicates the value of the overall company, not just equity. EV / EBITDA, is a measure of the cost of a stock which is more frequently valid for comparisons across companies than the price to earnings ratio. Like the P/E ratio, the EV / EBITDA ratio is a measure of how expensive a stock is. - EV/Sales Multiple – EV/sales is a crude measure, but least susceptible to accounting differences. It is equivalent to its equity counterpart, price to sales, where company has no debt - EV/EBIT Multiple - EBIT is a better measure of ‘free’ (post-maintenance capital spending) cash flow than EBITDA and is more comparable where capital intensities differ. - EV/FCF Multiple – EV/FCF is preferable to EV/EBITDA for comparing companies within a sector. Comparing across sectors or markets where companies have widely varying degrees of capital intensity - EV/Capacity - Core EV/units of capacity (such as tonnes of cement capacity) or another revenue-generating unit (such as subscribers). How to determine if the company Overvalued or Undervalued? There are primarily two ways in which fair valuation of the company can be arrived at using Relative Valuation technique. They are Historical Multiple Method and Sector Multiple Method. Historical Multiple Method The common approach is to compare the current multiple to a historical multiple measured at a comparable point in the business cycle and macroeconomic environment. The interpretations are relatively simpler if we create the Price to Earnings Graph. As noted above, the Foodland Farsi current PE ~ 20x, Txawm li cas los, the historical average PE was closer to 8.6x. Tam sim no, the market is commanding $20/EPS (defined as PE); Txawm li cas los, in the past this stock was trading at $8.6/EPS. This implies that the stock is overvalued with PE = 20x, when compared with historical PE = 8.6x and we may recommend SELL position on this stock. Sector Multiple Method In this approach we compare current multiples to those of other companies, a sector or a market. Below is a hypothetical example to explain this methodology. From the table above, the average PE multiple for IT sector is 20.7x. Txawm li cas los, the company under consideration – Infosys is trading at 17.0x. This implies that Infosys is trading below the average sector multiple and a BUY signal is warranted. Comparable Company Analysis Below is a typical relative valuation table that an analyst is expected to produce as a part of research. The comparison table contains the sector companies and their respective operating and valuation parameters. In most cases, the parameters contained in the table are as per below - Company Name - Latest Price - Market Capitalization - Tus nqi Enterprise - EBITDA - Net Income - Valuation Methodologies like PE, EV/EBTIDA, P/CF etc; - Trailing & Forward Multiples are Calculated (2-3 years of multiples) - Mean & Median Multiple values The procedure to calculate a multiple can be simply summarized as below Though the above example is simple, Txawm li cas los, for applying the same in real life scenario, one need to establish the value and the value driver and make several adjustments to it. In my next article in valuation series, I discuss the nuts and bolts of Comparable Company Analysis and how to professionally calculate the multiples and prepare a valuation table like a pro.
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- Cad é Luach Cothromas - Cad é luach Fiontraíochta - Comparáid a dhéanamh Luach Cothromas agus Luach Fiontar - Cothromas Luach Iolraithe - Fiontar Luach Iolraithe - Conas a Iolraithe ag baint úsáide as dtugann siad nó a undervalued a chinneadh - Ullmhú Fiontar agus Luach Cothromas comps Il Cad é Luach Cothromas? Luach Cothromais ach an Luach ar ghnólachta cothromais ie. an Capitalization margaidh na Gnólacht. Is féidir é a ríomh trí luach margaidh in aghaidh na scaire a roinnt ar líon iomlán na scaireanna gan íoc. Mar shampla, a ligean ar glacadh leis Cuideachta A bhfuil na saintréithe seo a leanas: Bunaithe ar an fhoirmle thuas, Is féidir leat a ríomh Cuideachta A luach Cothromas mar seo a leanas: Mar sin féin, i bhformhór na gcásanna nach bhfuil sé seo ina léiriú cruinn ar cuideachta luach fíor. Cad é Luach Fiontar? Enterprise value considers much more than just the value of a company’s outstanding equity. Insíonn sé duit cé mhéad is gnó fiú. Is é luach fiontar an praghas teoiriciúil d'fhéadfadh bhfaighteoir íoc as comhlacht eile, agus tá sé úsáideach i ngnólachtaí i gcomparáid le struchtúir caipitil éagsúla ós rud é an luach de ghnólacht tionchar ag a rogha struchtúr caipitil. A cheannach thar barr amach cuideachta, Bheadh an bhfaighteoir a glacadh fiach na cuideachta a fuair a, cé go mbeadh sé a fháil freisin gach na cuideachta a fuarthas ar airgead tirim. A fháil ar an fiach méaduithe an costas a cheannach ar an gcuideachta, ach a fháil an t-airgead a laghdaíonn an costas a fháil ar an gcuideachta. - Enterprise Value = Market value of operating assets - Equity Value = Market value of shareholders’ equity Glanfhiach – Tá fiach Glan cothrom le fiach airgid níos lú agus coibhéisí airgid iomlán. - Nuair a fiach iomlán a ríomh, a bheith cinnte go áiríonn tú an dá an fiach fadtéarmach agus an chuid atá ann faoi láthair an fhiachais fadtéarmach, nó gearr-théarma fiach. Aon i-an-airgead (ITM) Tá fiach inchomhshóite amhail is dá thiontú go cothromas agus ní mheastar fiach. - Airgead tirim agus cóibhéisí Nuair a ríomh, you should include such balance sheet items as Available for Sale Securities and Marketable Securities, - The market value of debt should be used in the calculation of enterprise value. Mar sin féin, in practice you can usually use the book value of the debt. Lig dom a mhíniú le sampla. Smaoinigh ar an chuideachta chéanna A agus cuideachta eile B a bhfuil an caipitlithe margaidh céanna. Glacaimid dhá chás, 1 agus 2. Ríomh an EV do Chás 1. Tá EV do Chuideachta A Capitalization Margadh ($50 milliún) + Fiach ($20 milliún) – Airgead tirim agus infheistíochtaí téarma Gearr ($0) = $70 milliún. Tá EV do Chuideachta B Capitalization Margadh ($50 milliún) + Fiach ($0) – Airgead tirim agus infheistíochtaí téarma Gearr ($0) = $50 milliún. Cé go bhfuil an dá chuideachta ar an capitalization margadh céanna, Is é an cheannach is fearr Cuideachta B, nó an chuideachta gan aon fhiach. Anois, mheas scéal 2 Ríomh an EV do Chás 2. Tá EV do Chuideachta A Capitalization Margadh ($50 milliún) + Fiach ($0) – Airgead tirim agus infheistíochtaí téarma Gearr ($5 milliún) = $45 milliún. Tá EV do Chuideachta B Capitalization Margadh ($50 milliún) + Fiach ($0) – Airgead tirim agus infheistíochtaí téarma Gearr ($15 milliún) = $35 milliún. Cé go bhfuil an dá chuideachta ar an capitalization margadh céanna agus gan aon fhiach, Is é an déileáil níos fearr Cuideachta B mar go mbeadh tú glacadh leis $15 milliún in airgead tirim ar cheannach na cuideachta. Cothromas Luach vs Luach Fiontraíochta Cothromas Luach vs Fiontar Luach Iolraithe Cad é Cothromas Il Luach? Tá na iolraithe luach cothromais araon uimhreoir agus ainmneoir mar bheart "Cothromas". Tá cuid de na iolraithe de iolraithe luach Cothromas atá de réir thíos. Uimhreoir – Equity Value is Price per share that shareholder’s are expected to pay for a single share of the company under consideration Denominator – Operating parameters like EPS, CFS, BV srl Bearta cothromais. Mar EPS Mar shampla - Tuilleamh in aghaidh na scaire agus léiríonn sé an brabús in aghaidh na scaire a fhabhraíonn chuig na scairshealbhóirí. - Il PE – Seo 'ceannlíne’ Tá cóimheas bunúsach a ríomh payback: Deir sé blianta cé mhéad’ earnings it will take for the investor to recover the price paid for the shares. Other things being equal, nuair a dhéantar comparáid ar an praghas de dhá stoic san earnáil chéanna ba chóir an infheisteoir fearr an ceann a bhfuil an PE is ísle. - PCF Il – Is tomhas ar ionchais an mhargaidh ar na sláinte airgeadais gnólachta todhchaí. Pléann an beart le sreabhadh airgid, na héifeachtaí de dhímheas agus fachtóirí neamhairgid eile a bhaint. - P / BV Il – Beart Úsáideacha ina bhfuil sócmhainní inláimhsithe an fhoinse giniúna luach. Mar gheall ar a nasc gar a thabhairt ar ais ar chothromas (praghas a leabhar atá PE méadaithe faoi ROE), tá sé úsáideach praghas a luach leabhair chun amharc éineacht le ROE - P / S Il - Is féidir le praghas / díolacháin a bheith úsáideach nuair a bhíonn cuideachta caillteanas nó a corrlaigh uncharacteristically íseal (gnólachtaí suaite) - PEG Il - A ratio used to determine stock’s value while taking into account earnings growth. The enterprise value multiples have both the numerator and the denominator as “Pre Debt” and “Pre-Equity” measure. Tá cuid de na iolraithe de iolraithe luach Fiontraíochta de réir thíos. Cad é Fiontraíocht Luach Iolraithe? Uimhreoir – Tá Luach fiontar príomha beart réamh-cothromas réamh-fiach agus mar a léiríonn EV luachanna araon do na Féichiúnaithe chomh maith le Scairshealbhóirí. Ainmneoir - Paraiméadair oibriúcháin mhaith Díolacháin, EBITDA, EBIT, FCF, Tá Cumas bearta réamh-cothromas réamh-fiach agus. Mar shampla EBITDA - tuillimh "roimh" dímheas cánach Ús agus amúchadh; Ciallaíonn seo go bhfuil EBITDA beart os comhair na féichiúnaithe agus scairshealbhóirí atá íoctha amach agus mar an gcéanna. - EV / EBITDA Il - Beart a léiríonn an luach na cuideachta iomlán, not just equity. EV / EBITDA, Is tomhas ar an costas a bhaineann le stoic atá níos bailí go minic le haghaidh comparáidí ar fud na cuideachtaí ná an praghas cóimheas tuilleamh. Cosúil leis an P / E cóimheas, an EV / Is cóimheas EBITDA tomhas cé chomh daor is stoic. - EV / Díolacháin Il – Tá EV / díolacháin beart amh, ach ar a laghad a oirfeadh do dhifríochtaí cuntasaíochta. Is ionann agus a mhacasamhail cothromais, praghas díolacháin, i gcás ina bhfuil an chuideachta aon fhiach - EV / Il EBIT - Is EBIT tomhas níos fearr ar 'saor in aisce' (caiteachas caipitil iar-cothabháil) sreabhadh airgid thirim ná EBITDA agus tá níos inchomparáide ina bhfuil easaontas idir intensities caipitil. - EV / FCF Il – EV / Tá FCF fearr EV / EBITDA do chuideachtaí i gcomparáid laistigh d'earnáil. Comparáid a dhéanamh thar earnálacha nó margaí ina bhfuil cuideachtaí céimeanna éagsúla go forleathan déine caipitil - EV / Cumas - EV / aonaid lárnacha acmhainn (cosúil le tonna de chumas stroighne) nó aonad ioncam-ghiniúna eile (cosúil le síntiúsóirí). Conas a chinneadh má tá an chuideachta dtugann siad nó a undervalued? Tá go príomha dhá bhealach inar féidir luacháil cothrom na cuideachta a tháinig ar úsáid a bhaint as teicníc Luachála choibhneasta. Tá siad Modh Il Stairiúil agus Earnáil Modh Il. Modh Il Stairiúil Is é an cur chuige coiteann don iolraí is atá ann faoi láthair a chur i gcomparáid le iolraí stairiúil thomhas ag pointe inchomparáide sa timthriall gnó agus an timpeallacht mhaicreacnamaíoch. An Tá léirmhínithe réasúnta simplí má chruthaíonn muid an Praghas do Thuilleamh Graph. Mar a luadh thuas,, an PE atá ann faoi láthair Foodland Farsi ~ 20x, áfach, ba é an meán-Corpoideachais stairiúil níos gaire do 8.6x. Faoi láthair, Is é an margadh ceannais $ 20 / EPS (a shainmhínítear PE); áfach, san am atá thart an stoc trádála ar $ 8.6 / EPS. Sé seo le tuiscint go bhfuil an stoc dtugann siad le PE = 20x, i gcomparáid le PE stairiúil = 8.6x agus is féidir linn a seasamh dhíol a mholadh ar an stoc. Earnáil Modh Il Sa chur chuige seo i gcomparáid againn iolraithe faoi láthair leis na cuideachtaí eile, earnáil nó margadh. Anseo thíos tá sampla hipitéiseach a mhíniú an mhodheolaíocht. Ón tábla thuas, Is é an meán-il Corpoideachais do earnáil TF 20.7x. Mar sin féin, an chuideachta faoi bhreithniú - Tá Infosys trádáil ar 17.0x. Ciallaíonn sé seo go bhfuil Infosys trádáil faoi mheán il earnáil agus tá comhartha cheannach údar. Anailís Cuideachta Inchomparáide Anseo thíos tá tábla luacháil tipiciúil coibhneasta go bhfuiltear ag súil le hanailísí a tháirgeadh mar chuid de thaighde. Tá an tábla comparáid na cuideachtaí san earnáil agus a gcuid paraiméadair oibriúcháin agus luacháil faoi seach. I bhformhór na gcásanna, Is iad na paraiméadair atá sa tábla thíos de réir - Ainm na Cuideachta - Praghas déanaí - Capitalization an mhargaidh - Luach Fiontar - EBITDA - Ioncam Glan - Modheolaíochtaí Luachála mhaith PE, EV / EBITDA, P / CF srl; - Trailing & Iolraithe ar aghaidh go Ríofa (2-3 bliain de iolraithe) - Meán & Luachanna Il airmheán Is féidir leis an nós imeachta a iolrú a ríomh achoimre go simplí mar atá thíos Cé go bhfuil an sampla thuas simplí, áfach, do chur i bhfeidhm mar an gcéanna i scéal saol fíor, Ní mór amháin a roinnt coigeartuithe a bhunú ar an luach agus an tiománaí luach agus a dhéanamh dó. I mo alt seo chugainn i sraith luachála, I discuss the nuts and bolts of Anailís Cuideachta Inchomparáide agus conas a ríomh go gairmiúil na hiolracha agus a ullmhú tábla luachála mhaith pro.