Themodelscanbestatedintermsofeitheractualdividends
(payoutratio)orpotentialdividends(FCFE/Earnings).Allof
theequitymultiples,otherthanthePEGratio,increaseasthe
payoutratioandthegrowthrateincrease,anddecreasewith
theriskinessofthefirm.Althoughthesearetheonlyvariables
thatmatterfortheearningsmultiples,thereturnonequityand
the net profit margin are the additional variables that
determine price-to-book and price-to-sales ratios,
respectively.
Theequitymultipleforahigh-growthfirmcanalsoberelated
tofundamentals.Inthespecialcaseofthetwo-stagedividend
discountmodel,thisrelationshipcanbemadeexplicitfairly
simply.Whenafirmisexpectedtobeinhighgrowthforthe
next n years and stable growth thereafter, the dividend
discount model can be written as follows: