FINANCIAL INVESTMENT COMPANIES (SIFS) RELATIVE VALUATION AND FUNDAMENTALS

We researched the impact of economic data analysis and fundamental financial valuation multiples on the Financial Investments Companies FICs (SIFs) valuations and market prices to assess how relevant these multiples are for relative calculations and ranking of these investment companies. In the first attempt to answer the primary question of our research, we applied the comparison evaluation via multiple methods in order to assess the relative value of the all 5 FICs (SIFs) listed on the Romanian Bucharest Stock Exchange, based on fundamental parameters of the analysis. One answer to the question of our research is that ROE and ROA multiples are the independent variables that best explains the relative valuation differences between the 5 FICs (SIFs). Then, we further approach the second part of the research question trying to identify any possible statistical relationships between multiples relative evaluation and the fundamental factors that feasibly influence these multiples. We analyzed nine regression equations between the three multiples (EV/EBITDA; P/E and Price/Book) and three of their possible independent fundamental factors (MktCap; Tax Rate; ROA; ROE and Reinvestment Rate). We performed our analysis for all 5 FICs (SIFs). Correlation between multiple fundamental factors suggests that the most significant are their relations with rates of return (ROA and ROE), and with the rate of reinvestment of net profit (ReinvRate). The negative correlation between the EV/EBITDA multiple and P/E multiple, on the one hand, and the ROE and ReinvRate, on the other hand, is explained by the fact that the profits number of the two multiples are included as denominator of the ratios of these multiples.