IMA S.p.A. : relative valuation (historical market multiples).

With regard to the valuation, it is interesting to consider also its historical market multiples.

However, it needs to mark the following considerations :

• Every time period has its own market multiples, due to the macroeconomics factors and to the economic cycle ; in this way, the comparison term loses its value ; 

• The market anticipates the events and prices the expectations ; for this reason, the past valuations had always incorporated the whole scenarios ; the valuations and future market multiples are more important ; 

• Thirdly, with regard to the litterature, the relative valuation is composed always with a peer analysis, with a focus on the expectations of the sector (see the link, https://michelecarollo.blogspot.com/2018/11/ima-spa-relative-valuation.html). 

Here, we have the historical market multiple P/S. I used this market multiple with the aim to reduce the bias : the results at the top of the income statement are less influenced by several factors. 

We can notice that the last multiples are higher than the past multiples but we must consider the previous paragraphs, of course.

Then, the market valuation tends to assign higher multiples to a growing company, over time, like IMA S.p.A.

In this way, it is advisable to consider also a median of the multiple or a weighted average (the past prices are less important than the current prices). 

The expected market multiples (the yellow columnes) are substancially lower than the mean, median and weighted average (black and dashed lines in the chart). The gap is not so wide (that confirms the previous valuation). 

The management efficiency : cost-to-income of the italian banks.

The cost to income ratio is equal to the operating costs divided by the intermediation margin. 

In other words, using the bank balance sheets items, it is equal to the following expression :

COST/INCOME RATIO : operating costs ("item 230") / total banking income ("item 120")

The meaning is : the lower the value expressed by the indicator, the greater the efficiency of the bank. Usually, the index is expressed as a percentage. Otherwise, the operating expenses are a percentage of the operating income. The ratio is also useful to value the productivity and the profitability for the banks. 

Here we have a sample : it is the peer group of the main banks, in Italy. In order to have a fair comparison, I used the adjusted results and I used the same criteria with regard to the same period, last year (we speak about the nine months ended on 30th September 2017 and about the nine months ended on 30th September 2016). For further info, please consult the notes below the table (1-7) and visit the section investor relations. 

At a glance, we can notice that : 

• The efficiency is substantially the same compared to last year ; indeed, we can see a slight improvement, in general.
• We have two banks that represent the outliers of the peer group : CVAL and CRG ; the ratios had a strong worsening, compared to the nine months of the year 2016. 
• In the same way, we have other outliers (by the positive side), FBK and BGN. However, the two banks have a similar cost/income ratio, substantially, compared to last year. Reasoning by p.p. : by the negative side, about + 60 p.p. ; by the positive side, about from -2 to -7 p.p. (2017 vs 2016). 
• Following the considerations of the previous points, it is more useful to focus on the median than on the mean. See the following table. 

Finally, the bar chart is much more explanatory. The two period have two colors, respectively, the light blue for the year 2017 and the red for the year 2016. The median is highlighted by a horizontal line.

With the aim of ranking the abovementioned banks, we have :

1) BGN ; 2) FBK ; 3) ISP ; 4) IFIS; 5) BPSO ; 6) MED ; 7) UCG ; 8) BMPS ; 9) BPER ; 10) UBI ; 11) CREDEM ; 12) BANCO BPM ; 13) CVAL ; 14) CRG.