The Errors and Performance of DCF Model- and EBITDA Multiple-Based Valuations of Czech and Polish Publicly Traded Companies

The diploma thesis sets to analyze the performance and accuracy of sell-side analysts’ valuation models as well as the performance of the P/E, EV/EBITDA, P/BV, and P/CF market multiples. Through thorough analysis of the analysts’ valuation reports, it was found that errors that relate to the calculation of the free cash flow and the residual value are strongly associated with the inaccuracy of the analysts’ target prices and errors per one valuation model are frequent. Sell-side analysts also fail to successfully rate companies’ shares with the BUY, HOLD, and SELL ratings. The best performing multiple was the EV/EBITDA while, contrary to some prior research, the P/CF was the worst performing multiple. Compared to only industry-based selection, selecting peer companies based on their industry and ROE improves the performance of P/BV and P/E only, but the EV/EBITDA remains the best multiple.