European Capital Market Study

Munich (1 February 2021)

ValueTrust released the sixth edition of the European Capital Market Study (Version: December 31, 2020), which provides a data compilation of capital market parameters that enables an enterprise valuation in Europe. The purpose of the study is to serve as a tool and data source as well as to show trends in the parameters analyzed.

The European Capital Market Study analyzes the relevant parameters to calculate the cost of capital with the Capital Asset Pricing Model (risk-free rate, market risk premium and beta). Additionally, ValueTrust determines implied as well as historical market and sector returns. 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.

ValueTrust provides an analysis of empirical (ex-post) cost of equity in the form of total shareholder returns, which consist of capital gains and dividends. The total shareholder returns can be used as a plausibility check of the implied (ex-ante) returns. Lastly, trading multiples frame the end of this study.

ValueTrust examines the before mentioned parameters for the European capital market (in form of the STOXX Europe 600). This index includes the countries Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland as well as the UK and has been subdivided into ten sector indices by industry: Financials, Basic Materials, Consumer Cyclicals, Real Estate, Industrials, Consumer Non-Cyclicals, Healthcare, Technology,
Utilities and Energy.