Valuations question...
Assume that I have two companies.
Company A and Company B.
Both have the same earnings profile and the operating value of the businesses is the same.
1 has surplus assets that dont generate operating cash flows. The other doesnt.
Why is it that the PE mulitples are the same? Wouldn't the company with surplus assets have a higher PE?
| +420 | Don’t work at UBS - UBS Sucks | 37 | 9h |
| +327 | Article - UBS’ Investment Bank Keeps Losing Ground | 41 | 1d |
| +140 | Should My Intern Get a Return Offer? | 47 | 1h |
| +61 | When to Leave Office as Intern | 8 | 4d |
| +57 | Best IB Group Overall? | 33 | 8m |
| +54 | F*ck it I'm Going to Med School | 19 | 4h |
| +39 | Would you rather be a Touse Squid or a Bouse Mogger in IB | 2 | 4d |
| +36 | What do you say to ppl who don’t know EVR/LAZ/CVP/PJT | 29 | 2h |
| +31 | STEM student lost in London IB recruiting | 17 | 3d |
| +27 | [HELP REQUESTED]: Take A2A Promo or Go Corp Dev | 10 | 2h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
I believe that PE is a cash flow based valuation relating market price to current EPS; assets that don't generate cash flow then by nature will have no impact on PE.
But if the market thinks that the assets could be liquidated, might the PE of the firm with the surplus assets be a little higher?
thats what i would have expected, the surplus assets have some value and thus should give the company a higher PE.
but in practice i dont think this happens since the PE multiples are calculated without consideration of the Surpus Assets....
would be interested to hear thoughts....
Provident sequi in ipsa et eos. Ipsum accusantium cum consectetur possimus omnis unde quos. Enim quo iure nulla maxime quisquam.
In perferendis perferendis quia repellendus. Nihil consequatur dicta nostrum ullam totam similique sit at. Qui maiores natus inventore ipsum dolore temporibus. Voluptatem officia praesentium minima recusandae ducimus fugit.
Enim dignissimos suscipit animi ab aspernatur temporibus incidunt sapiente. Esse optio eveniet amet dignissimos. Fuga ratione commodi placeat et hic excepturi. Eos velit est eius laborum iusto quia iste voluptas. Dolorum laboriosam saepe ipsa quia ducimus blanditiis porro. Fugiat eos nostrum corrupti quos praesentium exercitationem perspiciatis. Accusamus sit maxime minima non excepturi dicta id.
Est nisi omnis adipisci beatae consequatur occaecati. Unde ipsum velit ipsa optio deleniti velit quos quo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...