Equity valuation: A survey of professional practice

Pinto, Jerald E.; Robinson, Thomas; Stowe, John D.

doi:10.1002/rfe.1040

Cited by 55 publications

(30 citation statements)

References 20 publications

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“…A comparison of the primary evaluation criteria in traditional (non-financial) firms [49], high-tech firms (startups), and banks/financial intermediaries is reported in Table 1. The correlation with high tech firms and banks seems a useful tool to assess the overall sustainability of FinTechs and their contribution to making the overall financial ecosystem more resilient and inclusive.…”

Section: Methodology and Empirical Evidencementioning

confidence: 99%

Sustainability in FinTechs: An Explanation through Business Model Scalability and Market Valuation

2020

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Framework: Financial Technology (FinTech) is an industry composed of diversified firms that combine financial services with innovative technologies. The research question and main goal are attempting to answer whether they are more similar to traditional banks or trendy technological firms deploying their innovativeness to favor financial inclusion and sustainability. Justification: Evaluators may wonder if FinTechs follow the typical evaluation patterns of bank/financial intermediaries or those of technological firms. Preliminary empirical evidence shows that the latter interpretation is the one consistent with the stock-market mood. Objective: This study goes beyond the extant literature, analyzing the differences between FinTechs and traditional banks in market valuation, and showing the potential for digital interaction and cross-pollination of complementary business models. Methodology: The differences will be empirically analyzed with the stock market valuation and the multipliers associated with these firms. Results: The main contribution of this paper is that the appraisal approaches of FinTechs follow those of technological startups, having a revenue model much more scalable than that of a typical bank. FinTechs may so provide a solution for sustainable finance with microfinance and crowdfunding among others. FinTechs and traditional banks may eventually converge towards a common market exploiting co-opetition strategies.

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Section: Methodology and Empirical Evidencementioning

confidence: 99%

Sustainability in FinTechs: An Explanation through Business Model Scalability and Market Valuation

2020

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“…Furthermore, 12-month forward multiples are more preferred to trailing multiples. Pinto et al (2019) conducted a scientific survey, which focussed on the equity valuation practices of professionals with CFA designations. The authors come to the conclusion that 93% of the respondents use market multiples in their valuation analyses, 79% use a DCF approach, 61% an asset-based approach, and only 5% use a real options approach.…”

Section: Literature Review On Valuation Analyses By Institutional Inv...mentioning

confidence: 99%

How activist investors value target firms: Evidence from hedge fund presentations

Pfirrmann,

Eichner

2024

J Corp Accounting Finance

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This research study provides insights on how activist hedge funds perform valuation analyses of target firms. Relevant data was hand‐collected from a sample of activist hedge fund presentations. Based on the hedge funds’ valuation analyses, the undervaluation of the target firms amounts to approximately 30%, compared to the targets’ current share price. Besides, activist investors derive a value enhancement potential from their proposed strategies of approximately 70% to the targets’ current share price. These valuation results rely predominately on trading multiples. The dominant multiples are Enterprise value/EBITDA (EV/EBITDA) and Price/Earnings (P/E). Further, applied multiples are mainly forward‐looking, and the predicted performance measures are primarily consensus estimates. Besides, hedge funds sometimes adjust multiples arbitrarily to increase the comparability. Our results confirm that short‐term investors rely predominately on pricing analyses in their valuations.

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“…, 2014; Demirakos et al. , 2010; Imam et al ., 2008, 2013; Pinto et al. , 2019) which employ calculation at all stages, include some data from the primary financial statements and work synoptically, all the way through to an investment recommendation, even if this is then amended subjectively.…”

Section: Building Accounting Knowledge Of Intangiblesmentioning

confidence: 99%

“…As Lev (2019, p. 716) points out, analysts make extensive use of explicit, structured, quantitative modelling. They generally draw on a limited number of widely accepted models (Cascino et al, 2014;Demirakos et al, 2010;Imam et al, 2008Imam et al, , 2013Pinto et al, 2019) which employ calculation at all stages, include some data from the primary financial statements and work synoptically, all the way through to an investment recommendation, even if this is then amended subjectively. We might call these "disciplinary" models to distinguish them from Cartwrightian modelling.…”

Section: A Neoclassical Accounting Research Agendamentioning

confidence: 99%

A pragmatist neoclassical accounting research agenda for identifiable intangibles

Rutherford¹

2023

JAAR

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PurposeThis paper offers a way of revivifying classical accounting research in the form of a pragmatist neoclassical programme with a sound epistemological underpinning.Design/methodology/approachThe paper draws on a pragmatist perspective on financial accounting and accounting research springing from John Dewey's theory of inquiry.FindingsAlthough a pragmatist underpinning does not entail specific methodological prescriptions, it can provide fruitful insights in research design. The paper discusses the structure and content of a research programme drawing on a pragmatist underpinning and sets out proposals for a practical research agenda. Although the agenda is shaped around the topic of identifiable intangibles, much of the paper has substantially wider relevance.Research limitations/implicationsThe approach justifies a revival in scholarly research employing classical methods and directed at improving accounting methods and standards.Practical implicationsThe approach would promote closer engagement between scholarly accounting and practitioners such as standard-setters, making some contribution to closing the widely acknowledged gap between research and practice.Originality/valueThe paper offers a neoclassical programme of research drawing considerably more extensively on pragmatist philosophy than did theorisation in the classical period.

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Equity valuation: A survey of professional practice

Cited by 55 publications

References 20 publications

Sustainability in FinTechs: An Explanation through Business Model Scalability and Market Valuation

Sustainability in FinTechs: An Explanation through Business Model Scalability and Market Valuation

How activist investors value target firms: Evidence from hedge fund presentations

A pragmatist neoclassical accounting research agenda for identifiable intangibles

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