Reviewingourcalculations,thehighestestimatethatweget
for brand name value comes from the operating margin
approach($64billion)andthelowestestimatefromthereturn
on capital approach ($50 billion).
Relative Valuation Models
Inrelativevaluationmodels,wetrytoextractthevalueofa
brandnamebylookingathowthemarketpricescompanies
with and without brand name. The first relative valuation
approachdrawsfromthegenericfirmcomputationweused
earlier with discounted cash flow valuation. The second
approachgrowsoutofthemultipleregressionsweintroduced
in Chapter 9, where weregressed themultiplesthat firms
trade at against the fundamentals that determine that value.
Comparing Valuation to Generic Firm
This approach is built onthe premise that both thebrand
namecompanyandagenericcompanythatresemblesitare
publiclytraded.Sincewecanobservehowthemarketvalues
both firms, we can draw conclusions about the value it
attachestobrandnamebylookingatthedifferencebetween
the two valuations. The aggregate market values will be
difficulttocomparebecausethegenericfirmmaybesmaller
(or bigger) than the brand name company. Instead, we
compute enterprise value multiples for both firms, using
revenues, operating income, or book capital as a base. If
brandnamehasvalueandistheonlydifferencebetweenthe
two firms, the enterprise value multiple should be much
higherforthebrandnamecompanythanitisforthegeneric