Relative valuation, also referred to as comparable valuation, is a very useful and effective tool in

valuing an asset. Relative valuation involves the use of similar, comparable assets in valuing another
asset. A stock is share in a business and the fundamentals of the underlying business can be used to
determine the value of similar stocks. Some of the most common and useful metrics to utilize in
relative valuation include:
a) Price to Earnings ratio
b) Return on equity
c) Dividend Yield
d) Enterprise value
e) Price to Book
Like any valuation tool, relative valuation has its limitations. The biggest limitation is the assumption
that the market has valued the business correctly. Second, all valuation metrics are based on past
performance. Future performance drives stock prices and relative valuation does not account for
growth. Finally and most important, relative valuation is no assurance that the "cheaper" company
will outperform its peer.
Since no two assets are exactly the same, any relative valuation attempt should incorporate
differences accordingly.
Relative Valuation of Tyre Companies in India


Company Name
Industry: Year Equity Reserves Debt FV Sales NP Div IV BV EPS Price P/E P/B DY
Telecom
Services Rs. % Rs. Rs. Rs. Rs. %
MRF 201309 4.24 2,853.56 1,631.43 10 12,131.16 802.07 300 5630.000 6740.094 1891.675 22,310.00 11.7938 3.31004 0.13447
Apollo Tyres 201303 50.4 2,280.24 1,877.78 1 8,507.49 312.67 50 93.833 46.24286 6.20377 167.95 27.0722 3.63191 0.29771
Balkrishna Inds 201303 19.33 1,399.64 2,063.55 2 3,190.57 355.5 75 281.500 146.8153 36.7822 495 13.4576 3.37158 0.30303
CEAT 201303 35.96 708.77 803.83 10 4,881.44 120.35 40 750.667 207.0996 33.46774 404.6 12.0893 1.95365 0.98863
Goodyear India 201212 23.07 330.89 0.00 10 1,481.29 56.55 70 1313.667 153.4287 24.51235 427.8 17.4524 2.78827 1.63628
Full Year (Rs. Million) Share Price Info