Question

Which of these statements is incorrect regarding trading comparables?

Select one:

High growth companies typically have higher multiples

Profit margins are rarely static over time

Enterprise value and equity value are usually different

EV multiples grow as the value driver grows

Answer 1

When there would be growth of the value driver, it would mean that there would be undervaluation on the part of the company because it will be making the company more attractive.

So, when there would be higher value driver, then there would be lower enterprise value multiple because that would be making a company attractive and undervalued from the perspective of investors.

Other statements are completely true and inline with multiple and trading comparable.

Correct answer will be option (d) enterprise value multiple grow as the value driver grows