CIRO Peer Benchmarking & Valuation 3

Question 1

Which of the following best describes the 'football field' valuation chart used in IR presentations?

Accepted Answer

A visual displaying valuation ranges from multiple methodologies side by side

Answer

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

Question 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?

Accepted Answer

Multiple expansion

Answer

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

Question 3

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

Accepted Answer

A control and synergy premium

Answer

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

Question 4

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

Accepted Answer

Discounted Cash Flow (DCF)

Answer

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

Question 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?

Accepted Answer

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

Answer

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.

(CIRO) Certified Investor Relations Officer Practice Test

(CIRO) Certified Investor Relations Officer Practice Test

CIRO Peer Benchmarking & Valuation 3