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标题: Reading 42: Market-Based Valuation: Price and Enterprise Val [打印本页]

作者: 土豆妮 时间: 2010-4-19 15:36 标题: [2010]Session 12-Reading 42: Market-Based Valuation: Price and Enterprise Val

Session 12: Equity Investments: Valuation Models
Reading 42: Market-Based Valuation: Price and Enterprise Value Multiples

LOS h: Explain and justify the use of earnings yield (i.e., EPS divided by share price).

A common pitfall in interpreting earnings yields in valuation is:

A)
using underlying earnings.

B)
using negative earnings.

C)
look-ahead bias.

A common pitfall is look-ahead bias, wherein the analyst uses information that was not available to the investor when calculating the earnings yield.

作者: 土豆妮 时间: 2010-4-19 15:36

A common justification for using earnings yields in valuation is that:

A)
earnings are more stable than dividends.

B)
negative earnings render P/E ratios meaningless and prices are never negative.

C)
earnings are usually greater than free cash flows.

Negative earnings render P/E ratios meaningless. In such cases, it is common to use normalized earnings per share (EPS) and/or restate the ratio as the earnings yield or E/P because price is never negative. Price to earnings (P/E) ranking can then proceed as usual.

作者: 土豆妮 时间: 2010-4-19 15:36

The observation that negative price to earnings (P/E) ratios are meaningless and prices are never negative is used to justify which valuation approach?

A)
Dividend discount model.

B)
Dividend yield.

C)
Earnings yield.

The observation is used to justify the earnings yield approach. Negative P/E ratios are meaningless. In such cases, it is common to use normalized earnings per share (EPS) and/or restate the ratio as the earnings yield or E/P because price is never negative. Price to earnings (P/E) ranking can then proceed as usual.

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