Vlad Bulău


Professionals in enterprise valuation can use multiple methods and approaches for the valuation mission. To support them, the standards in the matter use the market approach, income approach, and cost approach. The market approach or comparison approach refers to determining the value of an entity or the common equity of an entity using direct comparison with other enterprises or similar shares traded on the free market (the price of which is public). The sources of information concerning such data are mainly the stock exchanges and the M&A (mergers and acquisitions) operations and preceding transactions with similar companies. The most common multiples in the market-based approach are PER (Price Earnings Ratio), PEG (Price Earnings to Growth), and EV/EBITDA. Within this study, we highlighted the extent to which these multiples reflect or not the market value of the companies analysed, as defined by the stock exchange mechanism. Furthermore, to achieve this goal we set out to establish the validity of three hypotheses regarding the ability of multiple-based methods to highlight a stock’s market price. Using a quantitative approach and historical data we demonstrated that market-based multiples are a safe way to obtain an enterprise’s fair value, pointing out that results vary slightly depending on the variables used.


JEL: M40, M41, M49


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valuation, investment funds, PER, PEG, EV/EBITDA, enterprise value, multiples

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