Recent scandals in companies such as Enron, WorldCom or Tesco have become
practical solid examples of accounting manipulation and have been disrupting the
accountancy field. As a consequence, there has been a regular reinforcement regarding
the practical use of accounting numbers. Equity valuation using accounting numbers
plays a vital responsibility in both finance and accounting areas, grounding on the use
and comparison of valuation models’ performance.
This dissertation aims to explore the association between high and low intangibleintensive
industries as well as the performance of accounting-based valuation models.
After assessing not only stock- but also flow-based models across the two industries,
results reveal a superior performance of the former models for low intangible-intensive
industries while flow-based models disclose superior stock price predictions for high
intangible-intensive industries. In complement, an analysis of the valuation techniques
applied in analysts’ reports demonstrates that marked multiples are usually the
preferred methodology for equity research analysts to value companies
