2025 CFA Level II Exam: Topic 5. Equity Valuation - Learning Module 23. Market-Based Valuation: Price and Enterprise Value Multiples

CFA Exams
2025 Level II
Topic 5. Equity Valuation
Learning Module 23. Market-Based Valuation: Price and Enterprise Value Multiples

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Learning Outcome Statements PDF Download

	1. Price Multiple Valuation Methods calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	2. Price to Earnings: Determining Earnings calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	3. Price to Earnings: Valuation Based on Forecasted Fundamentals calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	4. Price to Earnings: Valuation Using Comparables calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	5. Price to Book Value calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	6. Price to Sales calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	7. Price to Cash Flow calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	8. Dividend Yield calculate and interpret alternative price multiples and dividend yield; calculate and interpret underlying earnings, explain methods of normalizing earnings per share (EPS), and calculate normalized EPS; explain and justify the use of earnings yield (E/P); describe fundamental factors that influence alternative price multiples and dividend yield; calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals; calculate and interpret a predicted P/E, given a cross-sectional regression on fundamentals, and explain limitations to the cross-sectional regression methodology; evaluate a stock by the method of comparables and explain the importance of fundamentals in using the method of comparables; calculate and interpret the P/E-to-growth ratio (PEG) and explain its use in relative valuation; calculate and explain the use of price multiples in determining terminal value in a multistage discounted cash flow (DCF) model; explain alternative definitions of cash flow used in price and enterprise value (EV) multiples and describe limitations of each definition; calculate and interpret EV multiples and evaluate the use of EV/EBITDA;
	9. Enterprise Value / EBITDA Ratio explain sources of differences in cross-border valuation comparisons;
	10. Cross-Border Valuation describe momentum indicators and their use in valuation;
	11. Momentum Indicators explain the use of the arithmetic mean, the harmonic mean, the weighted harmonic mean, and the median to describe the central tendency of a group of multiples; evaluate whether a stock is overvalued, fairly valued, or undervalued based on comparisons of multiples.
	12. Valuation Indicators: Issues in Practice calculate and interpret residual income, economic value added, and market value added;

Your review questions and global ranking system were so helpful.

Lina

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