The corporate valuation model could be applied in both Vodafone and BT plc to valuate the firm in terms of its share price whether the investors could make decision regarding the investments in these orgsniation. The model also delivers the information whether the desired return on the investment could be disbursed to the equity holders and the external investors of both the companies.
The corporate valuation model can be applied to vodafone and BT plc for evaluating the corporate performance in terms of price to earnings ratio, price to book value ratio and earning per share and price to sales ratio.
According to the depicted table above, it reveals that price to earnings ratio of BT plc has increased from the year 2011 to 2015. Melo et al.(2009, p. 402) mentioned that the increase in the price to earnings ratio implies the investor’s attractiveness towards the stock. It reveals that the investors have become more attractive for investment in BT plc after 2013. The price to book value of BT plc has also increased from the year 2012. The increasing trend in the price to book value of BT plc implies that the company is accurately valued and attractive to the investors. The price to sales ratio and earning per share of BT plc has also increased from the year 2011 to 2015. It also implies that inventors are willing to pay for BT plc at present market situation.
The increasing trend of price to earnings ratio, price to book value ratio of Vodafone implies that the investors are interested to pay for the stock of vodafone. The earning per share of the company has also increased significantly from the year 2010 to 2014 and it signifies that the company has maintained higher retained earnings after meeting all the operating and nonoperating expense. However, the price to earnings and price to sales ratio of Vodafone has increased more that BT plc from the year 2013 to 2014. Hence, it can be inferred that BT plc stock was more attractive to the investors compared to Vodafone according to the valuation ratio. The increasing trend in the valuation ratio of BT plc implies that Vodafone is in better financial position compared to BT plc.
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