P/E, P/BV, Multiple deep dive

Question 1

Why might two companies with identical growth and cost of capital trade at different P/E multiples?

Answer 1

• Growth and cost of capital are not the only drivers of value
• ROIC also important
• Companies could also be in differen industries or GEO
• Or relative mispricing or inconsisten EPS calc

Question 2

Should two identical companies with different leverage ratios trade at different EV/EBITDA multiples?

Answer 2

Similar, since EV/EBITDA is capital structure neutral
But slighth diffrence due to cost of capital

Question 3

Should two identical companies with different leverage ratios trade at different P/E multiples?

Answer 3

P/E multiples can vary significantly due to leverage differences

• Debt will decrease EPS
• Share price hard to predict, depnds how debt is used

Question 4

Why might one company trade at a higher multiple than another?

Answer 4

• Superior fundamentals
• better growth
• lower wacc
• better cfs

Question 5

When would you value a business using the P/B ratio?

Answer 5

when the company’s book value captures a substantial part of its real value

Question 6

Du hast zwei Unternehmen mit gleichem EV/EBITDA aber unterschiedlichem P/E, wie kann das sein, welche zwei faktoren beeinflussen das (Financing, Taxes)?

Answer 6

Therefore, differences in capital structure and effective tax rate explain the discrepancy.

Question 7

How does an increase or decrease in div affect EV/EBITDA?

Answer 7

Stays same

Question 8

How does an increase or decrease in div affect P/E?

Answer 8

Div increase:
P decreases
E unchanged
P/E falls

Div decrease:
P straz the same
E unchanged
P/E rises

Question 9

How does an increase or decrease in div affect P/BV?

Answer 9