The analyst adds that the company's free cash flow strength seen in Q1 along with its more stable pricing trends warrant a higher multiple
for the stock.
Well-run companies with high margins that check all the boxes will generally command a higher multiple
than those that starve the company to achieve profits.
But if Sony can show a return to long-term growth (the upcoming PlayStation 5 game console cycle should be a helpful driver there in 2021 and beyond), the stock could enjoy a rerating to a higher multiple
, ultimately yielding a fatter share price.
But Party A's proposal "suggested an implied valuation of Aspen that was disproportionately lower than the implied valuation of Party A because Party A would be valued using a significantly higher multiple
to book value than the multiple to book value that be used to value Aspen in the transaction."
Even as its profits have surged 13-fold in the past decade, investors have steadfastly refused to pay a higher multiple
for the stock.
Most fund managers think that the sell-off was long overdue in equities especially in the United States where stock prices traded at higher multiple
compared to its counterparts in Europe and Japan.
Even though the depreciation of the lira erodes bank capital ratios because foreign currency assets, inflated when translated into the lira, represent a higher multiple
of lira-denominated equity, Fitch said: "Banks in Turkey wishing to open new branches must operate with a 12 percent minimum regulatory capital ratio, meaning that banks still have significant capacity to absorb the direct hit to capital from further moderate depreciation." The corresponding ratio stood at 14.8 percent at the end of August.
First, the seller often is in a position to negotiate a higher multiple
due to removing the risk of client attrition from the transaction.
Chong Hing last year went for higher multiple
, 2.4 times first-half last year book value.
A higher multiple
can signal that investors think the company may report stronger profit growth in the future.
Looking at it as a "financial" buyer, he valued it at a lower multiple, viewing it as something he would have to run profitably, with fewer growth prospects, obtain a reasonable return on capital, and hope to sell it in the future for a higher multiple