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UBS Valuation Multiples Primer

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UBS Valuation Multiples Primer
Valuation & Accounting

Global

November 2001

Valuation Multiples: A Primer

Global
Equity
Research

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Valuation Primer Series
Peter Suozzo
+852-2971 6121

■

peter.suozzo@ubsw.com

Stephen Cooper
+44-20-7568 1962

■

stephen.cooper@ubsw.com

Issue 1

This is the first in a series of primers on fundamental valuation topics such as discounted cash flow, valuation multiples and cost of capital.
This document explains how to calculate and use multiples commonly used in equity analysis.

Gillian Sutherland
+44-20-7568 8369 gillian.sutherland@ubsw.com Zhen Deng
+1-212-713 9921 zhen.deng@ubsw.com ■

We discuss the differences between equity and enterprise multiples, show how target or ‘fair’ multiples can be derived from underlying value drivers and discuss the ways multiples can be used in valuation. For each multiple, we show its derivation, discuss its strengths and weaknesses, and suggest appropriate use.

Valuation Multiples: A Primer November 2001

Contents
Peter Suozzo
+852-2971 6121 peter.suozzo@ubsw.com Stephen Cooper
+44-20-7568 1962 stephen.cooper@ubsw.com Gillian Sutherland
+44-20-7568 8369

page

An Introduction to Multiples ........................................................................... 3
— What Is a Multiple? ......................................................................... 3
— Advantages/Disadvantages of Multiples ........................................... 3
— Enterprise versus Equity Multiples ................................................... 5
— Why Multiples Vary......................................................................... 5

gillian.sutherland@ubsw.com

Zhen Deng
+1-212-713 9921 zhen.deng@ubsw.com — Choosing the Pricing
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