INDEX EVOLUTION
EV/EBITDA
INDEX VALUE (EV/EBITDA)
6.8x
2020 Q1
Sharp drop of the Infront Small Cap Eurozone valuation index in Q1 2020 with a median EV/EBITDA level of 6.8x (vs 8.6x in Q4 2019), easily explained by the Covid-19 crisis which generated a stock markets crash in February and March.

Updated 26 May 2020

The unprecedented global Covid-19 crisis generated a big storm in the stock markets during the first quarter, with stock market indices falling by almost 30% since the start of the year. This fall logically had a very strong impact on valuations of listed companies, including small and medium companies. The valuation of the Infront Small Cap Eurozone index drops by -21%, to 6.8x EBITDA and returns to the low levels of the 2009-2013 period. It is interesting to note that this drop in the EV/EBITDA multiple appears to be smaller than the average of the market prices and the main indices drop. It should be noted that at the end of March, most of the EBITDA retained were the EBITDA published at the end of the 2019 fiscal period. We explain this drop slightly smaller than the prices drop by the implementation of IFRS 16 on the 2019 published financial accounts. At constant market prices, EV/EBITDA valuation would have probably increased in the first quarter, because the recognition of operational leases as financial debt has a strong impact on enterprise value, with the Net Debt naturally increasing. With IFRS 16, EBITDA also increased with the transfer of lease expense from charges to depreciations and interest charges. But in most cases, between 2019 and 2018, the EBITDA has increased less than the debt, which gives at constant market a higher EV/EBITDA valuation. Given the market conditions in the first quarter of 2020, it is therefore difficult to draw conclusions on the impact of IFRS 16 on the Infront Small Cap Eurozone index. We can however see the effect on the EBITDA margin of the constituents of the index, which is increasing (from 10.8% in Q4 2019 to 11.5% in Q1 2020). On the private equity side, the Argos index on non-listed M&A transactions in the Eurozone also fell to 9.3x EBITDA, far from its record level of 10.3x EBITDA in Q4 2019. Despite the decline, the gap between the two indices (Infront and Argos) is still very high, and we still do not see an illiquidity discount for unlisted firms. For the other valuation indices used as benchmarks, the Large Caps Eurozone index (companies over € 500m in capitalization), resisted quite well considering the market prices drop (IFRS 16 effect?) at 9.1x EBITDA (-9% compared to its level of Q4 2019). Regarding small caps in the USA, we observe a bigger drop than in Europe, to 6.7x EBITDA (8.8x in Q4 2019), the valuation of small caps being therefore still very close on both sides of the Atlantic. The Nordic Small Caps index also stalled at 8.6x EBITDA (11.5x in Q4 2019). Geographically, French small caps suffered a huge drop in valuation to 5.6x EBITDA (-25%, 7.6x in Q4 2019), similar to German small caps which also fell sharply to 6.8x EBITDA (compared to 9.1x in Q4 2019). The Benelux recorded a slightly less significant drop of -21% to 6.8x EBITDA (8.6x in Q4 2019). In terms of the valuation of the most representative sectors within the index, the EBITDA multiples of companies ​​in the Health Care and Retail sectors held up well, with a drop of around 10%. The valuations of the Technology, Personal Goods, Travel & Leisure and Automotive sectors in particular are in sharp decline (between -25% and -30%).

INDEX EV/EBITDA MULTIPLES RANGES BY SECTOR

HIGHEST

Health Care
>10.0x
Utilities
>8.0x
Oil & Gas
>8.0x
Food & Beverage
>8.0x
Technology
>7.0x

LOWEST

Telecommunications
<6.0x
Travel & Leisure
<6.0x
Media
<6.0x
Chemicals
<6.0x
Automobiles & Parts
<4.0x
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INDEX CONSTITUENTS ANALYSIS
AS OF 31 MAR 2020
Median
Perf. (quarter)
-25.1%
Median
Market Cap.
76M€
Index No.
Companies
988
Median
EBITDA Margin
11.5%
Median
1yr Beta
0.73
INDEX CONSTITUENTS ANALYSIS
AS OF 31 MAR 2020
Median Stock Performance (quarter) -25.1%
Median Market Cap. 76M€
Number of Companies 988
Median EBITDA Margin 11.5%
Median 1yr Beta 0.73
INDEX BREAKDOWN
BY MARKET CAP
INDEX BREAKDOWN
BY COUNTRY
INDEX BREAKDOWN
BY SECTOR
INDEX BENCHMARK
EV/EBITDA