Billion-pound companies are still trading at a premium to their faster-growing counterparts, according to research from DC Advisory Partners.
Billion-pound companies are still trading at a premium to their faster-growing counterparts, according to research from DC Advisory Partners.
Companies in the FTSE All Share Index with a market capitalisation of less than £100 million are valued at 5 times earnings, while those worth more than £1 billion trade at an average of 7.3 times annual profits, the study finds.
The highest-rated companies are those worth above £500 million but less than £1 billion, which attract a multiple of 7.7 times earnings. For companies valued at between £100 million and £500 million, the average profits multiple is 6.1.
Guy Ballantine, a director at DC Advisory Partners (formerly Close Brothers Corporate Finance), says the relative unpopularity of small and mid-caps presents ‘a rare opportunity’ for acquirers and investors.
Five years ago, the current trend was reversed, with multiples averaging 9.1 times for companies worth less than £100 million, and 8 times for those valued at over £1 billion.
Adds Ballantine, ‘During buoyant economic times investors are more likely to seek out high growth, and often higher risk, small and mid cap companies.’
