Changes in the valuation of companies during COVID-19

Abstract

This study aims to expand the knowledge of the effects of the COVID-19 on the main valuation methods supported by the literature. Specifically, on the affectations that this pandemic had on the shareholder’s-equity based method, the discounted cash flow, and the multiples of comparable companies. Additionally, to be able to detect whether there have been sectors that have suffered more than others in terms of valuation. To reach this objective, different variance analyses of the valuations of the main IBEX-35 companies before and after the COVID-19 have been conducted. An impact on the main valuation methods by an alteration of the company’s enterprise value is expected, as well as across different economic sectors. Furthermore, the use of different discount rates to adapt the discounted cash flow to the level of risk and the EBITDA multiple to be the least sensitive to changes is foreseeable.