Session 12: Equity Investments: Valuation Models Reading 44: Market-Based Valuation: Price and Enterprise Value Multiples
LOS f: Discuss methods of normalizing EPS, and calculate normalized EPS.
The average return on equity (ROE) earnings normalization method relies on:
A) |
average ROE over the most recent cycle. | |
B) |
average earnings per share (EPS) over the most recent cycle. | |
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The average return on equity normalization method normalizes EPS as the average ROE over the most recent full cycle multiplied by book value per share.
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