i screen for high margin business.maybe 10%+.
look at consistency of earnings to determine the acceptable multiple for p/b, ev/fcf, or ev/ni. this will vary a lot. , high roe can have high p/b. but look at debt. cap ratio can easily vary cuz it affects roe.
the type of business. like you said some sectors should be close to p/b like fiancnials. while others like cash flowing companies might be high cuz they repurchase shares or pay divs. or tech will prolly be higher since it is dependnet on its earnings growth.
ev/fcf and ni is more of a takeover valuation and incorproate impact of debt. basically how long at current earnings and valuation will it take me to buy the co. growth of earnings will also determine the multiple. whether growth high or low, accelerating or decelerating, positive or negative.
i check to see how they did during 07-09. if they lose a lot of money relative to what they made in subsequent years i avoid.
check news and guidance to see if there is growth and if they are doing some major acquisiton or restructuring. i prefer companies that grow organic.
look at the level and timing of liabilities with respect to cash flow. curretn rates their debt is at.
valuaing companies is a lot like valuing people.
a broke black kid who got into harvard for medicine. would you consider him poor? sure he might take on a lot of debt now and his net worth is super negative, but you know he wouldnt sell his future earnings for 100k.
or what about a sales dude who makes 500k per year in acyclical business but saves nothing and has a net worth of say 100k. what would you pay for his future earnings.
what about a dide that makes 100k per year, but saves 20k, and he also inherited $10m.
or a dude that consistenly increases the amount he saves by 10% per year and currently at 100k.
what about a guy who has a million dollars in bitcoin. but his expenses are about 100k per year.
what about a real estate dude that has grown his net worth by 5m. saves 40k. but has a debt of 10m.
fan fan fan!