Jan 23, 2016

What multiples would I use for the Managed Care industry?

Question in title, companies liked Aetna, Cigna, etc. What multiples should be used? P/E, P/B, PEG, not EV/EBITDA, are ones that I know, are there any industry specific multiples I should use?

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6 Comments

dbdrake

10y

bump

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hardlyworking

10y

you use forward looking p/e. you dont look at price / book despite mcos effectively being financial institutions.

more specifically, the industry is moving away from reporting in gaap p/e towards reporting cash p/e. simply adjust earnings for the amortization line in the P&L, not cash flows. Reason being the P&L line is specific for amort due to acquisitions, which is how mcos grow.

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Authored by: Certified Investment Banking Professional - 2nd Year AnalystCertified Investment Banking Pro

dbdrake

10y

Thanks, why don't you use p/b?

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https://www.wallstreetoasis.com/resources/skills/trading-investing/sovereign-wealth-fund-swf

abacab

10y

NTM EV/EBITDA and NTM P/E. Just look at some research around ANTM-CI, AET-HUM and CNC-HNT. The analysts had some commentary around price paid/valuation multiple, etc.

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Authored by: Certified Investment Banking Professional - AssistantCertified Investment Banking Pro

dbdrake

10y

Thank you, what about PEG, and ROE?

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dbdrake

10y

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