The following excerpts from past equity analyst reports illustrate the use of multiple ratios in communicating views about a stock’s value. In the first excerpt, from a report on Colorpak Ltd. (Australian Stock Exchange: CKL), the analyst has used a discounted cash flow valuation as the preferred methodology but notes that the stock is also attractive when a price-to-earnings ratio (PER in the report) is used. In the second excerpt, from a report on AB InBev (Euronext Belgium: ABI), an analyst evaluates the stock price (then trading at 42.80) by using two multiples, price to earnings (P/E) and EV/

EBITDA, in relation to revised forecasts.

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Colorpak Ltd. (Australian Stock Exchange: CKL) Our DCF for CKL is A$0.82ps, which represents a 44% prem. to the current price. Whilst the DCF valuation is our preferred methodology, we recognise that CKL also looks attractive on different metrics. Applying a mid-cycle PER multiple of 10.5x (30% disc to mkt) to FY08 EPS of 7.6cps, we derive a valuation of A$0.80. Importantly, were the stock to reach our target of A$0.75ps in 12mths, CKL would be trading on a fwd PER of 9.1X, which we do not view as demanding. At current levels, the stock is also offering an attractive dividend yield of 5.7% (fully franked). [Note: "fully franked" is a concept specific to the Australian market and refers to tax treatment of the dividend.] Mario Maia, CFA Merrill Lynch (Australia) AB InBev (Euronext Belgium: ABI) Based on our slightly increased estimates, the shares are valued at a P/E and EV/EBITDA 2012 of 12.4x and 9x, slightly below the valuation of the large FMCG (fast-moving consumer goods) and spirits companies. Given its stronger profit growth, the brewer [ABI] could command a premium. We raise our target price from EUR52 to EUR53, implying a 24% upside. Buy. Ton van Ooijen, CFA Kepler Research