Valuation of high growth companies

Business & Finance, Finance & Investing, Finance
Cover of the book Valuation of high growth companies by Thomas Prielinger, GRIN Publishing
View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart
Author: Thomas Prielinger ISBN: 9783638055321
Publisher: GRIN Publishing Publication: May 29, 2008
Imprint: GRIN Publishing Language: English
Author: Thomas Prielinger
ISBN: 9783638055321
Publisher: GRIN Publishing
Publication: May 29, 2008
Imprint: GRIN Publishing
Language: English

Diploma Thesis from the year 2007 in the subject Business economics - Investment and Finance, grade: 1, University of Vienna (Institut für Finanzwirtschaft), 26 entries in the bibliography, language: English, abstract: In my thesis I examined the applicability of traditional valuation methods to value high growth companies. Consequently I presented and discussed possible modifications to the traditional methods, whereas I demonstratively applied some of the presented concepts in the case study. Considering relative valuation, traditional multiples based on historical financial data are not very useful for valuing such companies, as historical earnings are either negative or have low informational value. In my opinion, the presented concept of forward-looking (earnings) multiples is clearly superior to the traditional approaches using historical financials and also to the proposed modifications, which mostly have to be applied using historical data. The concept of knowledge-related multiples is interesting, although it uses historical financials; it may be useful and deliver accurate results in certain cases, but not especially when valuing high growth companies. Multiples based on non-financial data may only work well if a truly comparable company could be found. However, a multiples analysis should generally not be used for standalone company valuations, but rather to complement a DCF valuation, which is regarded as the more accurate method. In the second part I examined the DCF valuation and found that the general framework works even for high growth firms; only the estimation of separate inputs requires more effort and modified estimation approaches compared to stable growth companies. The scenario-based DCF approach is considered as the appropriate method to account for high uncertainty in company valuation, as it allows examining the effect of changes in fundamental value drivers, without having to use quite intransparent mathematical models. I also presented some in depth estimation issues for three main steps of a DCF valuation, which proved beneficial for doing the case study. The case study should demonstrate the specific problems relating to the valuation of high growth companies. By trying to value 'bwin', an Austrian online gaming firm, the case study reveals the deficiencies of traditional multiples and shows how the scenario-based DCF approach can be applied. Although scenario outcomes deliver an even broader value range than the multiples analysis, they allow accounting for the specific circumstances and reveal the possible effect of changes in the key value drivers for the company. The scenario-based DCF approach thus delivers the most valuable results in my opinion.

View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart

Diploma Thesis from the year 2007 in the subject Business economics - Investment and Finance, grade: 1, University of Vienna (Institut für Finanzwirtschaft), 26 entries in the bibliography, language: English, abstract: In my thesis I examined the applicability of traditional valuation methods to value high growth companies. Consequently I presented and discussed possible modifications to the traditional methods, whereas I demonstratively applied some of the presented concepts in the case study. Considering relative valuation, traditional multiples based on historical financial data are not very useful for valuing such companies, as historical earnings are either negative or have low informational value. In my opinion, the presented concept of forward-looking (earnings) multiples is clearly superior to the traditional approaches using historical financials and also to the proposed modifications, which mostly have to be applied using historical data. The concept of knowledge-related multiples is interesting, although it uses historical financials; it may be useful and deliver accurate results in certain cases, but not especially when valuing high growth companies. Multiples based on non-financial data may only work well if a truly comparable company could be found. However, a multiples analysis should generally not be used for standalone company valuations, but rather to complement a DCF valuation, which is regarded as the more accurate method. In the second part I examined the DCF valuation and found that the general framework works even for high growth firms; only the estimation of separate inputs requires more effort and modified estimation approaches compared to stable growth companies. The scenario-based DCF approach is considered as the appropriate method to account for high uncertainty in company valuation, as it allows examining the effect of changes in fundamental value drivers, without having to use quite intransparent mathematical models. I also presented some in depth estimation issues for three main steps of a DCF valuation, which proved beneficial for doing the case study. The case study should demonstrate the specific problems relating to the valuation of high growth companies. By trying to value 'bwin', an Austrian online gaming firm, the case study reveals the deficiencies of traditional multiples and shows how the scenario-based DCF approach can be applied. Although scenario outcomes deliver an even broader value range than the multiples analysis, they allow accounting for the specific circumstances and reveal the possible effect of changes in the key value drivers for the company. The scenario-based DCF approach thus delivers the most valuable results in my opinion.

More books from GRIN Publishing

Cover of the book An interpretation of 'A Lecture upon the Shadow' (John Donne) by Thomas Prielinger
Cover of the book Unilever Case Study by Thomas Prielinger
Cover of the book Intercultural communication as a strategy of global marketing by Thomas Prielinger
Cover of the book The experience of time and history and the disruption of narrative traditions in William Faulkner's 'The Sound and the Fury' by Thomas Prielinger
Cover of the book (Universal/University) 'ethics' with Kant, Hume, Hegel, Rousseau et al.? by Thomas Prielinger
Cover of the book The King's Favourites by Thomas Prielinger
Cover of the book Management Accounting at J Sainsbury plc by Thomas Prielinger
Cover of the book Downtown Dealership - An Effective Marketing Mix by Thomas Prielinger
Cover of the book Religion in Public Schools by Thomas Prielinger
Cover of the book On few similarities in Plato and Talmud by Thomas Prielinger
Cover of the book The effect of the German separation on the communication in Germany by Thomas Prielinger
Cover of the book Organisational culture as a management tool by Thomas Prielinger
Cover of the book Interviewing - a Way to Generate Qualitative Data by Thomas Prielinger
Cover of the book Institutions and Economic Development by Thomas Prielinger
Cover of the book Bali. Country Profile and Tourism by Thomas Prielinger
We use our own "cookies" and third party cookies to improve services and to see statistical information. By using this website, you agree to our Privacy Policy