European Capital Market Study

Munich (31 March 2020)

The latest edition of the ValueTrust European Capital Market Study is now available. Given the current COVID-19 crisis and the associated declines in market capitalization and revision of analyst forecasts, an additional study as of March 31, 2020 was released in order to give decision-makers guidelines with regard to current valuation parameters.

In this study, relevant parameters to calculate the cost of capital with the Capital Asset Pricing Model (risk-free rate, market risk premium and beta) are analyzed. Additionally, implied as well as historical market and sector returns are determined. Moreover, this study includes capital structure-adjusted implied sector returns, which serve as an indicator for the unlevered cost of equity. The relevered cost of equity can be calculated by adapting the unlevered cost of equity to the company-specific debt situation. This procedure serves as an alternative to the CAPM. Lastly, trading multiples frame the end of this study.