Disclaimer and Irrelevant Outcomes1
The information and analysis contained on this site is intended for informational purposes only and is not to be construed as an investment solicitation or recommendation of any kind. The subject valuation multiples, models, metrics, firm data, and valuations are presented as examples of tools used in modern corporate finance and may not be consistent with, or appropriate as, investment decision making tools.
The valuation model forms, inputs, and outcomes are based on an analysis of publicly available data for the subject firms as calendar year end 2015 and 2016, are not audited for accuracy, and may not represent reasonable facsimiles of observable data for the subject firms. Data collected through FactSet2, Value Line3, Bloomberg4 and other information repositories may be presented as stated, derived from source data, or synthesized using source data and analytical methods as noted.
The calculated valuations for the subject firms are formed using theoretical valuation model forms and are not intended to represent present or future values, real or nominal.
The Research Team is not affiliated with any broker-dealer, investment bank, investment advisor or advisory firm. Richard Haskell, PhD, is not currently a licensed investment representative of any kind. The various other members of the Research Team were not investment representatives when this informational site was created and published; their participation in The Valuation Project and The Power of Multiples was exclusive to their status as students in the Gore School of Business at Westminster College (Salt Lake City, Utah).
Investors should seek counsel from licensed financial professionals prior to considering any investment or investment transaction.
The accuracy of the data collection and analysis should not be relied on for personal, business, or academic use and should be verified before being used in any material way. The valuation model outcomes are projections of the present value of potential future cash flows from the subject firms and may not be accurate representations of the firm’s present or future value.
Valuation model outcomes require artful and considerate interpretation and should not be taken at “face value”. The outcomes presented in this study are the result of original input data, derived data, and synthesized inputs and, depending on the equational form of any particular valuation model, may result in irrelevant or implausible results. For example, four of the five valuation models under examination in this study employ similar denominators in their continuation forms in which the expected long-run growth rate of the firm’s cash flow (g) is subtracted from the firm’s Weighted Average Cost of Capital (WACC). In the event WACC < g, the value of this term will be expressly negative and may result in a negative overall valuation for the firm, even if the firm has a substantial Enterprise Value and consistently posts significant annual profits. While we may be left to consider whether or not the expected value of g is appropriate, we recognize such an outcome to be an irrelevant outcome and do not consider it5.
1 Prepared by Richard Haskell, PhD (2017), Associate Professor of Finance, Bill & Vieve Gore School of Business, Westminster College, Salt Lake City, Utah, firstname.lastname@example.org, www.richardhaskell.net
2 FactSet is a data repository delivering information to investment professionals and investors using publicly available analytics, service, content and technology; copyright FactSet Research Systems, Inc.; www.factset.com
3 Value Line includes data from over 6,000 stocks, 18,000 mutual funds, 200,000 options and other securities for use by investment professionals and individual investors; Value Line, Inc.; www.valueline.com
4 Bloomberg connects investors, decision makers and investment professionals with real-time and historical information for a wide range of domestic and international firm; Bloomberg L.P.; www.bloomberg.com
5 Discounted cash flow models generally produce consistently positive outcomes based on the condition ROIC > WACC > g. When a firm presents with a different generalized condition certain models may not be credible instruments for estimating the firm’s value.