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Peer Benchmarking & Valuation Flashcards

7 cards from real CIRO practice questions. Tap to flip, then mark Knew It or Still Learning โ€” missed cards come back until you master them.

Read the first 7 Peer Benchmarking & Valuation flashcards as text
  1. Which of the following best describes the 'football field' valuation chart used in IR presentations?

    Answer: A visual displaying valuation ranges from multiple methodologies side by side

    A 'football field' chart presents valuation ranges from DCF, comparable companies, and precedent transactions on a single horizontal bar chart.

  2. A company's EV/EBITDA multiple expanded from 8x to 12x over two years while EBITDA grew 10%. What is the primary driver of stock price appreciation?

    Answer: Multiple expansion

    When the multiple expands from 8x to 12x (50% increase) versus 10% EBITDA growth, multiple re-rating is the dominant driver of value creation.

  3. Precedent transaction multiples are typically higher than public company trading multiples because they include:

    Answer: A control and synergy premium

    Acquirers pay a control premium and expect to capture synergies, inflating transaction multiples above standalone trading levels.

  4. Which valuation method is most appropriate for a capital-intensive company with stable, predictable free cash flows?

    Answer: Discounted Cash Flow (DCF)

    DCF analysis is ideal for stable, cash-generative businesses where long-term cash flows can be reliably projected.

  5. An IR officer notices the company's Price-to-Book ratio is 0.8x versus peers at 1.5x. What is the most likely investor concern?

    Answer: The company's assets are overvalued or returns on equity are insufficient

    A P/B below 1.0x suggests the market values the company below its net assets, often indicating concerns about asset quality or inadequate return on equity.

  6. In benchmarking, 'normalizing' earnings means:

    Answer: Adjusting financials to remove one-time or non-recurring items for a cleaner comparison

    Normalizing removes non-recurring charges or gains so that ongoing earnings power is comparable across the peer group.

  7. What is the primary risk of using a peer group that is too large and diverse?

    Answer: Median multiples become meaningless because the peers are not truly comparable

    An overly broad peer group dilutes comparability; the resulting median valuation metric may not reflect any single company's true comparable universe.