The 12th International Conference on Applied Statistics The Bucharest University of

Economic Studies, 8th June, 2018

Evidence from Listed Steelproducers

REGRESSING ENTERPRISE VALUE ON SEVERAL
PREDICTORS
Madalina Viorica ION (MANU), PhD student
Bucharest University of Economic Studies, Romania

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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018

SUMMARY
Research on Enterprise Value and Equity Value multiples
 Highlights 

for valuation, in order to help companies increase their

 Market-wide value.
 value maximization asks managers to make all the decisions to
Regressions of increase the total long run market value of the firm, i.e.
financial claims – including equity, debt, preferred stock and
Multiples warrants. (Jensen, 2000)
 Market multiples are used in company valuation - part of
 Company’ share the market approach (relative valuation), when the
price history company is compared to similar ones (in terms of scope
of activity, size, number of employees etc.).
 Conclusions  Market multiples estimated through multiple regression
removes the subjectivity of choosing a ‘comparable’ set.
Synthetic multiples estimated on the basis of fundamental
data of companies determine which of the fundamentals
of such companies significantly influence the multiples
and quantify that influence and help assess company and
financial management performance. (Popa, 2014)
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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018

HIGHLIGHTS
 (Damodaran, 2018) ran a set of regressions across traded companies in
the United States using as inputs:
 g = The analyst estimate of earnings growth rate for the next 5 years (if not
available, used gEPS);
 Payout ratio= Dividends/Earnings;
 ROE =The return on equity;
 ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital
 Operating Margin = Pre-tax Operating Income/ Sales
 Invested Capital = Book value of equity + Book value of debt – Cash;
 ROE = Net Income/ Book value of Equity;
 Tax Rate = Effective tax rate = Taxes paid/ Taxable Income
 DFR = Total Debt/(Total Debt + Market value of equity)(
 RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t)

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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018

Regression R2
37.2%
PE = 5.91+ 113.72 gEPS + 17.43 Payout + 1.64 Beta
(1.57) (21.36) (21.11) (1.06)
PEG = 2.20 + 0.57 Payout – 0.47 ln(gEPS) -0.76 Beta 13.0%
(9.10) (6.24) (5.78) (5.54)
PBV= 2.52 + 4.77 gEPS - 0.81 Beta + 8.71 ROE 35.8%
(17.44) (10.62) (6.07) (29.08)
PS= 1.52 - 0.06 Beta +5.77 (gEPS) + 10.78 Net Margin 32.6%
(11.13) (0.43) (13.67) (28.66)
 
EV/Invested Capital= 3.45 + 0.63 g + 8.58 ROIC –4.40 DFR 58.9%
(43.41) (4.22) (37.43) (24.11)
EV/Sales = 2.77 + 8.60 g +10.12Operating Margin + 7.00 DFR- 3.80 Tax 39.3%
rate
MARKET-WIDE (19.19) (20.81) (29.80) (2.73) (11.67)
REGRESSIONS OF EV/EBITDA= 24.45 + 15.51 g - 18.20 DFR - 19.20 Tax Rate 7.5%
MULTIPLES (24.42) (5.57) (8.60) (6.82)

US Companies, in January 2018 (T statistics in brackets below coefficients)

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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018

VALUATION DATA
OVER TIME

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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018

Company’s market capitalization and share price - proxy for the enterprise value
of the world’s leading steel producer.
The quote history for the period 2007-2018

COMPANY’ SHARE PRICE HISTORY

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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018

COMPANY’ SHARE PRICE HISTORY (2009-2018)

The relation between volume and time

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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018

COMPANY’ SHARE PRICE HISTORY (2009-2018)

Workfile Loaded Eviews

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 The 12th International Conference on Applied Statistics The Bucharest University of
Economic Studies, 8th June, 2018
SUMMARY STATISTICS
Histograms for the Close Price and Volume