the cyclical fast growing company valuation Q was tricky… don’t really remember it but i sat there for a good 5 minutes trying to figure it out
Hmm…don’t recall this one for some reason.
it was asking something like do you use historical eps, historical average book val, historical avg eps… don’t remember exactly but it was afternoon session i believe
was one of the options something like current normalized EPS? I think thats what I chose…its all hazy though
nirjraina Wrote: ------------------------------------------------------- > was one of the options something like current > normalized EPS? I think thats what I chose…its > all hazy though I seem to recall this question and I believe I had the same answer as you nirj
nirjraina Wrote: ------------------------------------------------------- > was one of the options something like current > normalized EPS? I think thats what I chose…its > all hazy though I seem to recall this question and I believe I had the same answer as you nirj BTW, I was in DUbai in december, so beautiful, as soon as I get this designation I want to work there!
I think it was about a cyclical company but we have to adjust for company size … and avg roe over the last full cycle must be the option to use … and i used that … there is also a question like that in mock exam 1
Wouldn’t a historical average understate the company’s rapid growth? I’d think using current EPS (adjusted for business cycle effects) would be more accurate. Consider a firm with 3yr EPS’s of 3,5 and 7. Historical averaging would give you an EPS of 5 while next year’s EPS is likely closer to 9. Still, I could be wrong here.
that is the only way discussed in the “Price Mutiples” reading to adjust for the size of the company … and also you have to multiply the avg roe over full cycle to the latest BV to get the EPS… lets see…
i seem to remember putting somethign like “historical EPS doesn’t take into accout the firm’s growth.” really don’t know if that was right but it seemed better than the others.