Question

Which of the following best describes a pure – play?

A.A private firm that is held in isolation in a one- company investment portfolio

B. Publicly traded firm that is similar to the company or project being analyzed

C. Both A & B are correct

D. Neither a nor b is correct

Answer 1

Answer (C)

Pure play is a publicly traded company focused on only one industry or product pure play companies are popular with certain type of active investors who want to make very specific bets on particular product or industry segment for this investors buying a company with several diversified business lines forces them to take risk in industries in which they do not want to invest

Investors like pure play Because the cash flows are easy to follow no group is more appreciative of pure place however than the analyst community while such companies are there pure play provide analyst with greater accuracy in developing valuations based on relative and Precedent transactions

For arraylist pure play he presented opportunity to obtain more accurate data for a compatible or PO analysis these reports are a vital source of information for Investment analysis and the basis for relative valuation relative values include price to book ratio price to earning ratio price to sales ratio each of these values can help the investment analyst calculate the relative values for a company which allows the analyst to report if the company is overvalued or undervalued this relative values are based on Peer a company with two lines of business may have different profit margins