### Regressions of Multiples on Fundamentals: Market Wide

The following regressions were run across five groupings. The first and most comprehensive set of regressions were run across all traded companies in the United States. The second set of regressions were run across all traded companies in Western Europe and the UK. The third set of regressions were run across companies in emerging markets in Asia, Eastern Europe and Latin America. The fourth set of regressions were run across just Japanese companies. The final set is across all companies globally. If a regression yielded a large negative constant, I reran the regression without the constant to reduce the problem of negative predicted values for the multiples. You can find the multiples classified by region as well as by multiple.

 Region Multiple 1. United States 2. Europe 3. Emerging Markets 4. Japan 5. Global 6. EV to EBITDA

Using the regressions should be pretty straightforward, if you can get the data on the independent variables for your company and stay true to decimal format. (25% gets entered as 0.25). As an example, assume that you are looking at Disney in January 2022 and decide to use the US market regression for price to book ratio. Here are the inputs:
g = The analyst estimate of earnings growth rate for the next 5 years is 12% (if you do not have analyst estimates, substitute your own).
Payout ratio = 20%
ROE =The return on equity last year was 16.2%
Beta =1.10
Using the PBV regression:
PBV for Disney= 2.10 + 6.07 gEPS + 0.69 Beta + 5.09 ROE - 0.33 Payout Ratio
=2.10 + 6.07 (0.12) + 0.69 (1.10) + 5.09 (.162) - 0.33 (.20) = 4.35

At its actual price to book ratio of 3.90, Disney is under valued.

The PEG regression uses the natural log of the expected growth rate. Thus, if your expected growth rate is 15%, you will use ln(.15) = -1.8971

### Regressions classified by Region

Market-wide Regressions of Multiples: US Companies in January 2024

T statistics in brackets below coefficients

 Regression R Squared PE = 19.34 Beta + 68.70 gEPS + 10.37 Payout         (23.78)      (68.70)            (10.37) 33.6% PEG = 0.24 + 0.87 Payout – 0.58 ln(gEPS) - 1.28 Beta           (27.75)   (7.71)            (19.04)           (5.72) 8.6% PBV= 2.10 + 6.07 gEPS + 0.69 Beta + 5.09 ROE - 0.33 Payout Ratio           (7.30) (8.96)          (3.24)          (11.71)     (1.76) 21.9% EV/Invested Capital= 5.78 + 0.66 g  + 0.57 ROIC – 6.20 DFR                                   (54.84)   (1.64)      (5.95)     (39.88) 44.2% EV/Sales = 3.81  + 9.86 g + 8.19 Oper Margin -1.60 DFR- 5.88 Tax rate                    (29.70)  (19.48)   (25.12)                   (7.36)     (13.43) 36.0% EV/EBITDA= 27.61 + 40.22 g - 25.06 DFR -  37.09Tax Rate                        (44.93)    (24.65)   (18.92)         (14.67) 45.5% gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t)

Market-wide Regressions of Multiples – European companies in January 2024
T statistics in brackets below coefficients

 Regression R Squared PE = 11.89 + 1.47 Beta + 32.44 gEPS + 13.18 Payout         (8.82)   (1.93)     (9.96)            (10.01) 15.5% PEG = 0.42 + 0.96 Payout – 0.92 ln(gEPS) – 0.12 Beta           (1.59)   (5.88)            (10.82)           (1.36) 19.5% PBV= 1.20 + 3.25 gEPS + 0.06 Beta + 5.78 ROE + 1.36 Payout Ratio           (4.43) (5.65)          (0.42)          (12.69)     (6.29) 17.1% EV/Invested Capital= 3.56 + 2.82 g  + 4.,10 ROIC – 3.54 DFR                                   (37.70)   (10.07)      (19.87)     (31.52) 51.7% EV/Sales = 1.52  + 5.96 g + 6.13 Oper Margin + 2.04 DFR- 0.15 Tax rate                    (11.26)  (14.61)   (16.10)                          (11.35)     (0.40) 14.3% EV/EBITDA= 21.10 + 26.59 g - 12.75 DFR -  18.40 Tax Rate                        (43.03)    (16.19)   (14.78)         (11.33) 23.6% gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity)( RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t)

Market-wide Regressions of Multiples – Japanese companies in January 2024
T statistics in brackets below coefficients

 Regression R Squared PE = 4.65 + 6.94 Beta + 25.75 gEPS + 17.17 Payout         (2.38)  (6.92)     (3.80)            (7.84) 23.2% PEG = -0.31 Payout – 1.06 ln(gEPS) + 0.16 Beta           (1.40)            (14.84)           (1.61) 34.9% PBV= 0.48 gEPS + 0.78 Beta + 10.30 ROE + 0.10 Payout Ratio          (0.76)          (8.50)          (10.67)     (0.05) 34.9% EV/Invested Capital= 3.55 + 1.22 g  + 0.64 ROIC – 4.30 DFR                                   (31.39)   (2.34)      (9.61)     (29.28) 41.1% EV/Sales = 1.13  + 3.82 g + 8.97 Oper Margin + 0.33 DFR- 1.59 Tax rate                    (8.90)  (7.69)   (22.25)                          (2.12)     (4.42) 29.1% EV/EBITDA= 16.40 + 29.78 g - 2.07 DFR -  13.21 Tax Rate                        (19.45)    (8.86)   (1.91)         (4.97) 6.60% gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity)( RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

Market-wide Regressions of Multiples – Emerging Market companies in January 2024
T statistics in brackets below coefficients

 Regression R Squared PE = 15.02 + 0.06 Beta + 41.70 gEPS + 3.71 Payout         (15.78)  (0.12)     (22.31)            (3.91) 24.8% PEG = 1.06 +0.20 Payout – 0.43 ln(gEPS) - 0.12 Beta           (8.81)   (2.72)            (11.24)           (2.57) 9.0% PBV= 0.99 +1.80 gEPS - 0.13 Beta + 9.50 ROE + 1.80 Payout Ratio           (6.67) (7.89)          (1.77)          (27.35)     (2.61) 32.9% EV/Invested Capital= 3.29 + 1.25 g  + 0.96 ROIC – 3.76 DFR                                   (64.77)   (9.52)      (11.37)     (59.55) 50.1% EV/Sales = 3.07  + 1.48 g + 4.29 Oper Margin - 0.24 DFR- 2.22 Tax rate                    (37.19)  (8.97)   (18.42)                          (1.92)     (8.18) 8.9% EV/EBITDA= 23.99 + 12.69 g - 14.49 DFR -  22.25 Tax Rate                        (54.14)    (14.01)   (19.28)         (15.67) 16.7% gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

Market-wide Regressions of Multiples – Global companies in January 2024
T statistics in brackets below coefficients

 Regression R Squared PE = 16.90 + 3.20 Beta + 51.53 gEPS + 2.68 Payout         (22.96)  (6.53)     (27.77)            (3.98) 17.2% PEG = 1.21 + 0.17 Payout – 0.70 ln(gEPS) + 0.001 Beta           (9.82)   (2.36)            (16.96)           (0.02) 8.0% PBV= 2.29 + 3.12 gEPS - 0.16 Beta + 6.61 ROE - 0..29 Payout Ratio           (20.31) (13.52)          (2.49)          (29.17)    (3.43) 19.8% EV/Invested Capital= 4.70 + 0.70 g  + 0.86 ROIC – 5.00 DFR                                   (113.51)   (5.25)      (18.30)     (93.76) 44.3% EV/Sales = 3.35  + 3.36 g + 6.45 Oper Margin - 0.52 DFR- 3.82 Tax rate                    (58.99)  (21.73)   (41.35)                     (5.85)     (20.93) 18.0% EV/EBITDA= 24.82 + 26.15 g - 17.85 DFR -  25.43 Tax Rate                        (95.20)    (38.53)   (36.49)         (27.01) 28.9% ERP = Total Equity Risk Premium for country in which company is incorporated gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

### Regressions classified by Multiples

Market-wide Regressions of Multiples: PE Ratios in January 2024

T statistics in brackets below coefficients

 Regression R Squared Region PE = 19.34 Beta + 68.70 gEPS + 10.37 Payout         (23.78)      (68.70)            (10.37) 33.6% US PE = 11.89 + 1.47 Beta + 32.44 gEPS + 13.18 Payout         (8.82)   (1.93)     (9.96)            (10.01) 15.5% Europe PE = 4.65 + 6.94 Beta + 25.75 gEPS + 17.17 Payout         (2.38)  (6.92)     (3.80)            (7.84) 23.2% Japan PE = 15.02 + 0.06 Beta + 41.70 gEPS + 3.71 Payout         (15.78)  (0.12)     (22.31)            (3.91) 24.8% Aus, NZ & Canada PE = 14.41 - 1.24 Beta + 92.94 gEPS + 7.49 Payout         (6.91)  (0.74)     (14.80)            (5.31) 40.5% Emerging Markets PE = 16.90 + 3.20 Beta + 51.53 gEPS + 2.68 Payout         (22.96)  (6.53)     (27.77)            (3.98) 17.2% Global ERP = Total Equity Risk Premium for country in which company is incorporated gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

Market-wide Regressions of Multiples: PEG Ratios in January 2024

T statistics in brackets below coefficients

 Regression R Squared Region PEG = 0.24 + 0.87 Payout – 0.58 ln(gEPS) - 1.28 Beta           (27.75)   (7.71)            (19.04)           (5.72) 8.6% US PEG = 0.42 + 0.96 Payout – 0.92 ln(gEPS) – 0.12 Beta           (1.59)   (5.88)            (10.82)           (1.36) 19.5% Europe PEG = -0.31 Payout – 1.06 ln(gEPS) + 0.16 Beta           (1.40)            (14.84)           (1.61) 34.9% Japan PEG = 1.06 +0.20 Payout – 0.43 ln(gEPS) - 0.12 Beta           (8.81)   (2.72)            (11.24)           (2.57) 9.0% Emerging Markets PEG =0.32 Payout – 1.64 ln(gEPS) - 0.54 Beta           (1.09)            (16.80)           (2.72) 46.2% Aus, NZ & Canada PEG = 1.21 + 0.17 Payout – 0.70 ln(gEPS) + 0.001 Beta           (9.82)   (2.36)            (16.96)           (0.02) 8.0% Global ERP = Total Equity Risk Premium for country in which company is incorporated gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

Market-wide Regressions of Multiples: PBV Ratios in January 2024

T statistics in brackets below coefficients

 Regression R Squared Region PBV= 2.10 + 6.07 gEPS + 0.69 Beta + 5.09 ROE - 0.33 Payout Ratio           (7.30) (8.96)          (3.24)          (11.71)     (1.76) 21.9% US PBV= 1.20 + 3.25 gEPS + 0.06 Beta + 5.78 ROE + 1.36 Payout Ratio           (4.43) (5.65)          (0.42)          (12.69)     (6.29) 17.1% Europe PBV= 0.48 gEPS + 0.78 Beta + 10.30 ROE + 0.10 Payout Ratio          (0.76)          (8.50)          (10.67)     (0.05) 34.9% Japan PBV= 0.99 +1.80 gEPS - 0.13 Beta + 5.52 ROE - 0.09 Payout Ratio           (10.73) (7.78)          (7.45)          (8.87)     (0.56) 36.9% Emerging Markets PBV= 3.07 +1.80 gEPS - 1.49 Beta + 9.50 ROE + 1.80 Payout Ratio           (6.67) (7.89)          (1.77)          (27.35)     (2.61) 32.9% Aus, NZ & Canada PBV= 2.29 + 3.12 gEPS - 0.16 Beta + 6.61 ROE - 0..29 Payout Ratio           (20.31) (13.52)          (2.49)          (29.17)    (3.43) 19.8% Global ERP = Total Equity Risk Premium for country in which company is incorporated gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

Market-wide Regressions of Multiples: EV to Invested Capital Ratios in January 2024

T statistics in brackets below coefficients

 Regression R Squared Region EV/Invested Capital= 5.78 + 0.66 g  + 0.57 ROIC – 6.20 DFR                                   (54.84)   (1.64)      (5.95)     (39.88) 44.2% US EV/Invested Capital= 3.56 + 2.82 g  + 4.,10 ROIC – 3.54 DFR                                   (37.70)   (10.07)      (19.87)     (31.52) 51.7% Europe EV/Invested Capital= 3.55 + 1.22 g  + 0.64 ROIC – 4.30 DFR                                   (31.39)   (2.34)      (9.61)     (29.28) 41.1% Japan EV/Invested Capital= 3.29 + 1.25 g  + 0.96 ROIC – 3.76 DFR                                   (64.77)   (9.52)      (11.37)     (59.55) 50.1% Emerging Markets EV/Invested Capital= 2.38 + 0.71 g  + 4.62 ROIC – 2.06 DFR                                   (17.66)   (2.27)      (11.40)     (12.29) 44.4% Aus, NZ & Canada EV/Invested Capital= 4.70 + 0.70 g  + 0.86 ROIC – 5.00 DFR                                   (113.51)   (5.25)      (18.30)     (93.76) 44.3% Global ERP = Total Equity Risk Premium for country in which company is incorporated gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

Market-wide Regressions of Multiples: EV to Sales Ratios in January 2024

T statistics in brackets below coefficients

 Regression R Squared Region EV/Sales = 3.81  + 9.86 g + 8.19 Oper Margin -1.60 DFR- 5.88 Tax rate                    (29.70)  (19.48)   (25.12)                   (7.36)     (13.43) 36.0% US EV/Sales = 1.52  + 5.96 g + 6.13 Oper Margin + 2.04 DFR- 0.15 Tax rate                    (11.26)  (14.61)   (16.10)                          (11.35)     (0.40) 14.3% Europe EV/Sales = 1.13  + 3.82 g + 8.97 Oper Margin + 0.33 DFR- 1.59 Tax rate                    (8.90)  (7.69)   (22.25)                          (2.12)     (4.42) 29.1% Japan EV/Sales = 3.07  + 1.48 g + 4.29 Oper Margin - 0.24 DFR- 2.22 Tax rate                    (37.19)  (8.97)   (18.42)                          (1.92)     (8.18) 8.9% Emerging Markets EV/Sales = 1.39  + 3.02 g + 4.31 Oper Margin + 1.21 DFR+ 3.18 Tax rate                    (5.82)  (5.00)   (9.36)                          (3.15)     (4.78) 14.7% Aus, NZ & Canada EV/Sales = 3.35  + 3.36 g + 6.45 Oper Margin - 0.52 DFR- 3.82 Tax rate                    (58.99)  (21.73)   (41.35)                     (5.85)     (20.93) 18.0% Global ERP = Total Equity Risk Premium for country in which company is incorporated gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars

Market-wide Regressions of Multiples: EV to EBITDA Ratios in January 2024

T statistics in brackets below coefficients

 Regression R Squared Region EV/EBITDA= 27.61 + 40.22 g - 25.06 DFR -  37.09Tax Rate                        (44.93)    (24.65)   (18.92)         (14.67) 45.5% US EV/EBITDA= 21.10 + 26.59 g - 12.75 DFR -  18.40 Tax Rate                        (43.03)    (16.19)   (14.78)         (11.33) 23.6% Europe EV/EBITDA= 16.40 + 29.78 g - 2.07 DFR -  13.21 Tax Rate                        (19.45)    (8.86)   (1.91)         (4.97) 6.60% Japan EV/EBITDA= 23.99 + 12.69 g - 14.49 DFR -  22.25 Tax Rate                        (54.14)    (14.01)   (19.28)         (15.67) 16.7% Emerging Markets EV/EBITDA= 19.73 + 12.89 g - 14.19 DFR -  6.74 Tax Rate                        (18.06)    (4.54)   (7.04)         (2.13) 10.0% Aus, NZ & Canada EV/EBITDA= 24.82 + 26.15 g - 17.85 DFR -  25.43 Tax Rate                        (95.20)    (38.53)   (36.49)         (27.01) 28.9% Global ERP = Total Equity Risk Premium for country in which company is incorporated gEPS = Expected growth rate in EPS for next 5 years (analyst estimates) g = Expected growth rate in revenues for next 5 years (if not available, use gEPS) Payout = Dividends/Earnings ROIC = Return on capital = EBIT (1- tax rate)/ Invested Capital Operating Margin = Pre-tax Operating Income/ Sales Invested Capital = Book value of equity + Book value of debt - Cash ROE = Net Income/ Book value of Equity Tax Rate = Effective tax rate = Taxes paid/ Taxable Income DFR = Total Debt/(Total Debt + Market value of equity) RIR = Reinvestment Rate = (Cap Ex – Depreciation + Chg in WC)/ EBIT (1-t) WACC = Cost of capital in US dollars