Efficiency of Financial Parameters in Value Prediction Error

Abstract - This paper is motivated by the deficiency of relevant research related to multiples. It also seems a gap between the widespread usage of multiples and another method of valuation in valuation practice. These studies have so many issues and several compilations. To close the deficiency, this paper based on examines the role of multipliers in equity valuation. In this paper, we use fundamental drivers (equity and entity) to identify their variation from the industry’s multipliers. In terms of relative performance, the results show equity value multiples outperform entity value multiples. The result based on descriptive statistics and chart performance techniques also advocate that equity multipliers are better than entity based multipliers. Key Words: Equity valuation, Multiples analysis, Iron & Steel sector, Valuation accuracy, Financial parameters, P/B ratio, Inventory turnover