Equity Valuation Using Multiples

Abstract

Despite the fact the multiple valuation method is widely use in practice, surprisingly there is few empirical research available. To my knowledge, this study is probably the first empirical investigation on valuation performance of multiples in plantation sector and emerging market in Asia. I found that when selecting comparable firms either using plantation sector membership or adopting return of equity as control factor in plantation sector, price-to-earnings multiple leads to best valuation performance. In contrast, price-to-sales multiple yields the worst valuation performance in both selection methods. Moreover, the method using return of equity as control factor in plantation sector outperforms the selection method based on plantation sector membership.