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A Note on a Framework for Valuation Ratios Based on Fundamentals

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  • Cheng Lai

Abstract

Valuation ratios divide stock price by accounting metrics such as earnings, earnings growth, and book value. This study adapts the general valuation framework in Ohlson and Juettner‐Nauroth (2005) and Ohlson (2005) to present a unified approach for developing valuation ratios based on fundamentals, referred to as fundamental valuation ratios. One starts with a valuation model that is driven by an accounting metric a and its abnormal growth, then divides the valuation model by a to get a fundamental valuation ratio. For any valuation ratio, one can find a corresponding fundamental valuation ratio, as long as the valuation model is based on the same metric a as the valuation ratio denominator. Note sur un cadre de référence applicable aux ratios d’évaluation basés sur les indicateurs fondamentaux Les ratios d'évaluation établissent un rapport entre le cours des actions et des mesures comptables telles que les bénéfices, la croissance des bénéfices et la valeur comptable. L'auteur adapte le cadre d'évaluation général proposé par Ohlson et Juettner‐Nauroth (2005) et par Ohlson (2005) de manière à uniformiser la façon de procéder à l'élaboration de ratios d'évaluation fondés sur les indicateurs fondamentaux, appelés ratios d'évaluation fondamentaux. Il s'agit en premier lieu d'utiliser un modèle d'évaluation basé sur une mesure comptable a et sa croissance anormale, et de diviser ensuite le résultat obtenu par a pour dériver un ratio d'évaluation fondamental. Pour tout ratio d'évaluation, un ratio d'évaluation fondamental correspondant peut être déterminé, à condition que le modèle d'évaluation s'appuie sur la même mesure a que le dénominateur du ratio d'évaluation.

Suggested Citation

  • Cheng Lai, 2020. "A Note on a Framework for Valuation Ratios Based on Fundamentals," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2213-2223, December.
    • Handle: RePEc:wly:coacre:v:37:y:2020:i:4:p:2213-2223
    DOI: 10.1111/1911-3846.12596
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