30 years: Corporate Valuations
In the previous videos, Sarah discussed enterprise and equity valuation multiples. In this video, Sarah concludes these topics by explaining the drawbacks of multiple valuations. She first explains the pitfalls common to both enterprise and equity multiples. Finally she touches upon some pitfalls specific to equity multiples.
In the previous videos, Sarah discussed enterprise and equity valuation multiples. In this video, Sarah concludes these topics by explaining the drawbacks of multiple valuations. She first explains the pitfalls common to both enterprise and equity multiples. Finally she touches upon some pitfalls specific to equity multiples.
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8 mins 27 secs
Multiples are used for deriving valuations for different purposes by different groups of users. Whilst their main advantage is that they provide relative valuations (compare one investment with another), multiples do have a number of pitfalls. They come with a host of drawbacks, some of which are common to both enterprise and equity multiples and some that are specific to one of the two. It is important to learn these drawbacks and understand why some investors prefer other valuation methods such as DCF.
Key learning objectives:
Understand the drawbacks common to enterprise value and equity value multiples
Understand the drawbacks specific to equity valuations (PE ratios)
Access this and all of the content on our platform by signing up for a 14-day free trial.
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