RT Journal Article
SR Electronic
T1 Determinants of Analysts’ Target P/E Multiples
JF The Journal of Investing
FD Institutional Investor Journals
SP 35
OP 42
DO 10.3905/joi.2014.23.3.035
VO 23
IS 3
A1 Yuan Yin
A1 Ken Peasnell
A1 Martien Lubberink
A1 Herbert G. Hunt III
YR 2014
UL https://pm-research.com/content/23/3/35.abstract
AB Prior literature suggests that earnings multiple–based valuation methods play a dominant role in practical equity valuation. This study examines how sell-side analysts select the price–earnings multiples for the firms they follow. The authors analyze a sample of P/E multiples applied by analysts of some leading brokerage firms. The results suggest that analysts tend to assign higher P/E multiples to firms with superior earnings growth prospects in the near term and in the longer run, whereas those with high levels of risk measured by financial leverage, earnings volatility, book-to-market, and stock price volatility receive lower P/E multiples.TOPICS: Fundamental equity analysis, portfolio theory