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How would you value an equity using relative valuation (also known as the comparables method)? How...

How would you value an equity using relative valuation (also known as the comparables method)?

How would you value a firm/enterprise using relative valuation?

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ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Multiples method/relative valuation method of valuing a company is an approach based on valuing a company on the basis of how similar companies are valued.

It requires the use of price multiples.

Such as:
1. Market capitalisation.
2. Enterprise value.
3. Earnings
4. Sales
5. Cash flow
6. Book value
7. Earnings before depreciation interest and tax.
8. Earnings before interest and tax etc.

Generally, P/E ratio (price to earnings ratio), P/B ratio (price to book ratio) is used to in case of valuation of Equity.

EV/Sales (enterprise value/sales), EV/EBIT is an appropriate multiple for valuation of firm/enterprise.

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