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Price-to-Sales ratio                  7x
 Companies in same INDUSTRY,
 with same quality. Their only
 difference is Size of Market    6x
 Capitalization:

                   Median: 4x

                       3x
Small                             Large
Cap.            2x                Cap.
Price-to-Sales ratio                 7x
  Companies in same INDUSTRY,
  with same SIZE. Their only
  difference is QUALITY OF      6x
  EARNINGS:

                  Median: 4x


  High-               3x          LOW-
 quality                         quality
earnings        2x              earnings
Price-to-Sales ratio                 7x
  Companies in same INDUSTRY,
  with same SIZE. Their only
  difference is QUALITY OF      6x
  EARNINGS:

                  Median: 4x


  LOW-                3x         HIGH-
 quality                         quality
earnings        2x              earnings
Price-to-Earnings ratio                17x
 Companies in same INDUSTRY,
 with same quality. Their only
 difference is Size of Market    12x
 Capitalization:

                  Median: 10x

                       7x
Small                              Large
Cap.            5x                 Cap.
Price-to-Earnings ratio               17x
  Companies in same INDUSTRY,
  with same SIZE. Their only
  difference is QUALITY OF      12x
  EARNINGS:

                  Median: 10x


  High-               7x          LOW-
 quality                         quality
earnings        5x              earnings
Price-to-Earnings ratio               17x
  Companies in same INDUSTRY,
  with same SIZE. Their only
  difference is QUALITY OF      12x
  EARNINGS:

                  Median: 10x


  LOW-                7x          HIGH-
 quality                          quality
earnings        5x               earnings
Price-to-Cash Flow                    15x
 Companies in same INDUSTRY,
 with same quality. Their only
 difference is Size of Market    11x
 Capitalization:

                   Median: 8x

                       5x
Small                              Large
Cap.            2x                 Cap.
Price-to-Cash Flow                  15x
  Companies in same INDUSTRY,
  with same SIZE. Their only
  difference is QUALITY OF      11x
  EARNINGS:

                  Median: 8x


  High-               5x          LOW-
 quality                         quality
earnings        2x              earnings
Price-to-Cash Flow                  15x
  Companies in same INDUSTRY,
  with same SIZE. Their only
  difference is QUALITY OF      11x
  EARNINGS:

                  Median: 8x


  LOW-                5x          HIGH-
 quality                          quality
earnings        2x               earnings
Business Cycle
         Peak        LOW-quality
                       earnings




           HIGH-
           quality        Trough
Trough    earnings
Price-to-Earnings ratio
                                       17x
       + 2 St.dev: 17x
                               RELATIVELY
      + 1 St.dev: 15x          EXPENSIVE

      Median: 13x

   Below-Average PER


KEY                 This area: Relatively CHEAP
Price-to-Sales ratio
   Price-to-Earnings ratio     Expen-
  Price-to-Cash Flow ratio
    Price-to-Book Value
                                sive
         EV / EBITDA
                               Stock B
Approach
                Industry Average
#1
           Stock A           “Same- Quality

     Bargain                    Earnings &
                              F.Conditions”
Price-to-Sales ratio
   Price-to-Earnings ratio      Expen-
  Price-to-Cash Flow ratio
    Price-to-Book Value
                                 sive
         EV / EBITDA
                                This week
Approach
                Historical Average
#2                of one and the same stock

           Last Year          “Same- Quality

     Bargain                     Earnings &
                               F.Conditions”
Capital to Raise?
                      __bn /
Sales
Assets                50bn?
              2bn /
 200m / 1bn   __bn?   Guide to
  20%                 Estimate

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Examples price to sales ratios per p bv p cf

  • 1. Price-to-Sales ratio 7x Companies in same INDUSTRY, with same quality. Their only difference is Size of Market 6x Capitalization: Median: 4x 3x Small Large Cap. 2x Cap.
  • 2. Price-to-Sales ratio 7x Companies in same INDUSTRY, with same SIZE. Their only difference is QUALITY OF 6x EARNINGS: Median: 4x High- 3x LOW- quality quality earnings 2x earnings
  • 3. Price-to-Sales ratio 7x Companies in same INDUSTRY, with same SIZE. Their only difference is QUALITY OF 6x EARNINGS: Median: 4x LOW- 3x HIGH- quality quality earnings 2x earnings
  • 4. Price-to-Earnings ratio 17x Companies in same INDUSTRY, with same quality. Their only difference is Size of Market 12x Capitalization: Median: 10x 7x Small Large Cap. 5x Cap.
  • 5. Price-to-Earnings ratio 17x Companies in same INDUSTRY, with same SIZE. Their only difference is QUALITY OF 12x EARNINGS: Median: 10x High- 7x LOW- quality quality earnings 5x earnings
  • 6. Price-to-Earnings ratio 17x Companies in same INDUSTRY, with same SIZE. Their only difference is QUALITY OF 12x EARNINGS: Median: 10x LOW- 7x HIGH- quality quality earnings 5x earnings
  • 7. Price-to-Cash Flow 15x Companies in same INDUSTRY, with same quality. Their only difference is Size of Market 11x Capitalization: Median: 8x 5x Small Large Cap. 2x Cap.
  • 8. Price-to-Cash Flow 15x Companies in same INDUSTRY, with same SIZE. Their only difference is QUALITY OF 11x EARNINGS: Median: 8x High- 5x LOW- quality quality earnings 2x earnings
  • 9. Price-to-Cash Flow 15x Companies in same INDUSTRY, with same SIZE. Their only difference is QUALITY OF 11x EARNINGS: Median: 8x LOW- 5x HIGH- quality quality earnings 2x earnings
  • 10. Business Cycle Peak LOW-quality earnings HIGH- quality Trough Trough earnings
  • 11. Price-to-Earnings ratio 17x + 2 St.dev: 17x RELATIVELY + 1 St.dev: 15x EXPENSIVE Median: 13x Below-Average PER KEY This area: Relatively CHEAP
  • 12. Price-to-Sales ratio Price-to-Earnings ratio Expen- Price-to-Cash Flow ratio Price-to-Book Value sive EV / EBITDA Stock B Approach Industry Average #1 Stock A “Same- Quality Bargain Earnings & F.Conditions”
  • 13. Price-to-Sales ratio Price-to-Earnings ratio Expen- Price-to-Cash Flow ratio Price-to-Book Value sive EV / EBITDA This week Approach Historical Average #2 of one and the same stock Last Year “Same- Quality Bargain Earnings & F.Conditions”
  • 14. Capital to Raise? __bn / Sales Assets 50bn? 2bn / 200m / 1bn __bn? Guide to 20% Estimate