Equity Valuation: Sum-of-parts, PE, PB valuations?
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I noticed that some reports use these methods instead of DCF or DDM. When should sum-of-parts, PE or PB valuations be used? In the PE and PB methods, the analyst seemed to simply use the industry PE or PB ratio with forecasted earnings or book value to derive a target price.
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Answer:
SOTP analysis is used to value a company with business segments in different industries that have different valuation characteristics. For example take Seaboard (SEB), they grow food, have a fleet of transport ships, and produce electric power; all very different industries.
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