An equity analysis and valuation: the relative multiples approach.

Abstract

The study provides an equity analysis and valuation of a company in respect of equity research report essentials of Chartered Financial Analyst (CFA) Institute. Tipco Foods Public Company Limited, a listed company in the Stock Exchange of Thailand (SET), was chosen for the study to find out its market value of the company in relations with the selected industry peers. In using the particular technique of relative valuation, three different multiples were particularly employed including Price/Earnings (P/E), Price/Book Value (P/BV), and Enterprise Value to Earnings Before Interests Taxes Depreciation and Amortisation (EV/EBITDA), to suggest its relative value to the food and beverage industry in SET. The relative values from all ratios indicate that the company was undervalued, and strongly suggest that an investor should buy Tipco’s stocks. However, some limitations are found as four companies used as the industry peers, only one of them was considered as the closest peer in terms of its revenue structure and the product portfolios in the core businesses. Besides, the company’s stock performance heavily relies upon its investment in an associated company in a different industry. This perhaps brings an argument against its accuracy with some qualitative considerations.