Product features
The valuation method of enterprises is also very different according to different business models of enterprises. Asset-heavy enterprises (such as traditional manufacturing industry) are generally based on the valuation of net assets and supplemented by the valuation of profits. Asset-light enterprises (service industries) are generally based on the valuation of profits and supplemented by the valuation of net assets. Internet enterprises generally take the number of users, click rate and market share as the long-term consideration, while emerging industries and high-tech enterprises generally take the market share as the long-term consideration, and the valuation method is suitable to take the market sales rate as the main consideration. Thus, the commonly used valuation methods are price-earnings ratio, price-sales ratio and PEG valuation method.
This official website enterprise valuation platform main core functions：PE Valuation，PS Valuation，PEG Valuation，EV Valuation，Cash flow Valuation。
1、PE Valuation
The Earnings multiple (P/E ratio) is also known as the "price-earnings ratio", the "share-earnings ratio" or the "market earnings ratio". Its advantage is to measure profitability by earnings per share, which is a relatively common factor determining the investment value. Empirical studies show that the p/E ratio difference is significantly correlated with the long-term average stock return difference. And its disadvantage is that the net profit fluctuation is more violent, and affected by a variety of factors, leading to the p/E index is unstable, easy to be manipulated by the management.
2、PS Valuation
Price-to-sale (PS), PS= total market value ÷ main business income or PS= share Price ÷ sales per share. The lower the price-to-sales ratio, the greater the current value of the stock. Its advantage is that the price-to-sales ratio is still applicable to companies with operating losses; Unlike earnings per share and book value, sales revenue is often hard to manipulate or distort. Price-to-sales ratios are not as volatile as price-to-earnings ratios; Empirical studies show that the difference in the price-to-sales ratio is significantly correlated with the difference in the long-term average stock return. Its disadvantage is that high sales revenue does not necessarily mean high operating profit; The mark-to-market ratio does not reflect the difference in cost structure between different companies; Although not as easily distorted as profits, the way sales revenue is recognised can still distort sales forecasts and so on.
3、PEGValuation
PEG=PE/ net profit growth rate. PEG is different from PE valuation. While PE merely reflects the current value of an enterprise, PEG relates the current value of the enterprise to its future growth. For example, a company with a current PE of 20 times and an expected earnings per share compound growth rate of 20% over the next 5 years would have a PEG of 1. When PEG is equal to 1, it indicates that the market is valuing the stock to fully reflect its future performance growth. We can tell whether it is overvalued relative to the future.
4、EVValuation
EV/EBIT is a significantly better valuation tool than PE. PE is actually the market value of the business divided by net profit. Market capitalisation is only one part of the business. EV/EBIT solves this problem. EV refers to enterprise value, which takes into account not only shareholders but also creditors. This is to treat the enterprise as a whole, so as to avoid the problem of PE. In addition, PE does not take into account the capital structure, so in many cases even two companies in the same industry may not be able to directly compare. EBIT is earnings before interest and tax, which is more comparable by excluding the impact of capital structure on corporate profits.
5、Cash flow Valuation
Cash flow Valuation(DCF) replace dividends with free cash flow. The free cash flow of a company is proposed by The American scholar Rabapotte. The basic concept is the cash generated by a company and remaining after meeting the reinvestment needs, which can be distributed by the company's capital suppliers (i.e., various interest claimants, including shareholders and creditors) without affecting the company's sustainable development.
Enterprise Valuation Platform