Ertragswert

Ertragswert

What Is Ertragswert?

The Ertragswert, or "earnings value," is a method of Unternehmensbewertung that estimates the current value of a business or asset based on its expected future earnings or cash flows. This valuation approach falls under the broader financial category of company valuation and is a form of income capitalization. The core idea behind the Ertragswert is that an asset's worth is derived from the income it is expected to generate over its lifespan. It stands in contrast to methods that focus solely on historical costs or market comparisons, emphasizing the intrinsic value based on future Ertrag potential. This method is crucial for investors and businesses looking to make informed Investitionen and strategic decisions.

History and Origin

The concept underpinning the Ertragswert, which is the idea of discounting future income streams to arrive at a present value, has roots as far back as when money was first lent with interest in ancient times. In the context of modern finance, discounted cash flow (DCF) analysis, a direct antecedent and conceptual cousin of the Ertragswert, gained significant traction. Its explicit articulation and widespread discussion in financial economics occurred throughout the 20th century, notably popularized by economists like Joel Dean in 1951, who introduced the DCF approach as a tool for valuing financial assets by drawing an analogy with bond valuation.¹⁶,¹⁵ The methodology of discounting expected future benefits to estimate present value became a foundational element in Bewertungsmethoden. Its application evolved from the early 1800s in specific industries, such as the UK coal industry, to being widely adopted in U.S. courts by the late 20th century.

Key Takeaways

• The Ertragswert values an asset based on its projected future earnings or cash flows.
• It is a form of income capitalization, discounting anticipated future benefits to their present value.
• Crucial inputs include expected future earnings, the duration of those earnings, and an appropriate Diskontierungszinssatz.
• The method inherently considers the Zeitwert des Geldes, meaning that a euro received today is worth more than a euro received in the future.
• It is widely used in business acquisitions, tax planning, and strategic financial planning to determine a company's intrinsic worth.

Formula and Calculation

The Ertragswert is calculated by discounting the expected future net earnings or Cashflow of a business or asset back to their present value. A common formula for a perpetuity, assuming constant future earnings and a constant discount rate, is:

Where:

• ( E ) = Expected annual net earnings or cash flow
• ( r ) = Discount rate or capitalization rate, representing the required rate of return or cost of capital.

For scenarios with varying earnings or a finite projection period followed by a terminal value, the formula becomes a sum of discounted individual future earnings and a discounted terminal value:

Where:

• ( E_t ) = Expected net earnings or cash flow in year ( t )
• ( r ) = Diskontierungszinssatz
• ( n ) = Number of years in the explicit forecast period
• ( TV ) = Terminal Value, representing the value of the business beyond the forecast period. This is often calculated using a perpetuity growth model (e.g., ( TV = \frac{E_{n+1}}{r-g} )), where ( g ) is the perpetual Wachstumsrate of earnings.

The discount rate ( r ) is critical and typically reflects the Risikoprämie associated with the expected income stream, the cost of equity, or the weighted average cost of capital.

Interpreting the Ertragswert

Interpreting the Ertragswert involves understanding what the calculated value signifies in practical terms. A higher Ertragswert indicates that the business is expected to generate substantial future earnings relative to the discount rate, making it potentially more attractive to investors. Conversely, a lower Ertragswert suggests limited future profitability or a higher perceived risk. This value is considered an intrinsic value, meaning it represents the fundamental worth of the business based on its earning power, rather than its current Marktwert or asset base. It helps stakeholders assess whether a business is undervalued or overvalued in the market by comparing the Ertragswert to the asking price or current valuation. The interpretation must also consider the sensitivity of the Ertragswert to its underlying assumptions, such as the chosen discount rate and the projected Gewinn.

Hypothetical Example

Consider "GreenGrow Landscaping GmbH," a small business specializing in sustainable landscaping, which an investor is considering acquiring. The investor projects GreenGrow's future net earnings (after all expenses and taxes) to be:

• Year 1: €50,000
• Year 2: €55,000
• Year 3: €60,000
• Year 4: €65,000
• Year 5: €70,000

After year 5, the investor assumes a perpetual growth rate (g) of 2% for earnings, and determines an appropriate discount rate (r) of 10%, reflecting the risk of the business and market conditions.

Step 1: Calculate the present value of earnings for the explicit forecast period (Years 1-5).

• Year 1: ( \frac{€50,000}{(1+0.10)^1} = €45,454.55 )
• Year 2: ( \frac{€55,000}{(1+0.10)^2} = €45,454.55 )
• Year 3: ( \frac{€60,000}{(1+0.10)^3} = €45,078.90 )
• Year 4: ( \frac{€65,000}{(1+0.10)^4} = €44,385.92 )
• Year 5: ( \frac{€70,000}{(1+0.10)^5} = €43,465.73 )

Sum of present values for Years 1-5 = ( €45,454.55 + €45,454.55 + €45,078.90 + €44,385.92 + €43,465.73 = €223,839.65 )

Step 2: Calculate the Terminal Value (TV) at the end of Year 5.
The earnings for Year 6 would be ( €70,000 \times (1 + 0.02) = €71,400 ).
Using the perpetuity growth model:
( TV = \frac{€71,400}{(0.10 - 0.02)} = \frac{€71,400}{0.08} = €892,500 )

Step 3: Discount the Terminal Value back to the present.
Present Value of Terminal Value = ( \frac{€892,500}{(1+0.10)^5} = \frac{€892,500}{1.61051} = €554,166.75 )

Step 4: Calculate the total Ertragswert.
Total Ertragswert = Sum of present values (Years 1-5) + Present Value of Terminal Value
Total Ertragswert = ( €223,839.65 + €554,166.75 = €778,006.40 )

Based on these projections and the chosen discount rate, the Ertragswert of GreenGrow Landscaping GmbH is approximately €778,006.40. This figure would guide the investor in determining a fair price for the business and informs their Anlageentscheidungen.

Practical Applications

The Ertragswert method is a cornerstone in various financial contexts, especially where the earning capacity of a business or asset is paramount.

• Business Acquisitions and Mergers: Buyers often use the Ertragswert to determine a fair purchase price for a target company, assessing its future profitability rather than just its current Bilanz.
• Estate and Gift Tax Valuation: For privately held businesses, the Internal Revenue Service (IRS) recognizes the income approach, which includes discounted cash flow methods, as a valid way to determine fair market value for tax purposes.,
• Legal Disputes: In cases like divorce settlements or shar¹⁴e¹³holder disputes, the Ertragswert can provide an objective valuation of a business interest.
• Strategic Planning: Businesses utilize this method internally to evaluate the viability of new projects, expansion plans, or the overall long-term value creation of their operations.
• Lending and Financing: Lenders may assess a company's Ertragswert to understand its capacity to generate future Cashflow and service debt, providing insights into its ability to meet financial obligations. The Federal Reserve also monitors asset valuations and the impact of interest rates on business values, influencing lending and investment environments.,
• Real Estate Investment: While often applied to businesses¹²,¹¹ the principle of Ertragswert can also be used to value income-generating real estate properties based on their expected rental income.

The use of this method provides a forward-looking perspective, essential for understanding the true economic value, particularly for entities whose value is primarily driven by future Kapitalisierung of earnings.

Limitations and Criticisms

Despite its widespread use and theoretical soundness, the Ertragswert method has several limitations. Its accuracy heavily relies on the quality and reliability of future Prognose regarding earnings or cash flows. Predicting these figures far into the future involves inherent uncertainty and can be highly subjective, as minor changes in assumptions can lead to significant variations in the final valuation., For instance, factors like economic cycles, unforeseen market shi¹⁰f⁹ts, or changes in Inflation rates can materially impact future earnings.

Another significant criticism stems from the sensitivity of the Ertragswert to the chosen Diskontierungszinssatz. Even a small adjustment in this rate can drastically alter the calculated value. Determining the "appropriate" discount rate is complex, often relying on theoretical models and subjective judgments about risk., Furthermore, a substantial portion (often 65-75%) of the total Er⁸t⁷ragswert can be attributed to the terminal value, which represents the value of cash flows beyond the explicit forecast period. This reliance on a distant, often vaguely defined future period makes the valuation highly susceptible to even slight errors in long-term growth rate assumptions.,

The Ertragswert method might also struggle with companies that h⁶a⁵ve unstable or negative Cashflow, startups with no historical earnings, or businesses undergoing significant transformations. In such cases, projecting a consistent or reliably growing income stream becomes exceptionally challenging. Some critics argue that the DCF model, upon which the Ertragswert is based, is untestable in practice and can foster overconfidence in its precision, as genuine foresight is rare.,

Ertragswert vs. Substanzwert

The Ertragswert and [Substanzwer⁴t³](https://diversification.com/term/substanzwert) are two distinct, yet often complementary, approaches in business valuation. The fundamental difference lies in their focus:

While Ertragswert measures a company's ability to generate value, Substanzwert focuses on its underlying assets. For a healthy, operating business, the Ertragswert is often higher than the Substanzwert, as it accounts for the future earning power, goodwill, and synergistic value of the enterprise. The Substanzwert represents a "floor" value, indicating what the company's assets would be worth if liquidated or if the company ceased operations. Often, Unternehmensbewertung incorporates elements of both methods to provide a comprehensive view of a company's worth.

FAQs

What is the primary purpose of calculating the Ertragswert?

The primary purpose is to determine the intrinsic value of a business or asset based on its potential to generate future Ertrag. It helps investors decide if an acquisition or investment is financially sound by comparing this intrinsic value to the asking price.

How does the discount rate affect the Ertragswert?

The Diskontierungszinssatz is crucial because it accounts for the time value of money and the risk associated with future earnings. A higher discount rate (reflecting greater risk or a higher required return) results in a lower Ertragswert, while a lower discount rate yields a higher Ertragswert.

Is Ertragswert the same as a company's market capitalization?

No, the Ertragswert is an estimated intrinsic value derived from future earnings, while Marktwert (or market capitalization for public companies) is the current trading price of a company's shares multiplied by the number of shares outstanding. While the Ertragswert can inform an investor's view on whether a stock is undervalued or overvalued compared to its market price, they are distinct concepts.

Can Ertragswert be used for startups or companies with no profits?

It is challenging to use the Ertragswert method for startups or companies with no consistent [Gewinn] or Cashflow because the method relies heavily on projecting stable or predictable future income streams. Other valuation methods, such as the venture capital method or market multiples, might be more appropriate in such cases.

Who typically uses Ertragswert valuations?

Investors, business owners, financial analysts, tax authorities like the IRS, and legal professionals commonly use Ertragswert valuations for various purposes, including buying or selling businesses, tax planning, and litigation. Financial regulators such as the Federal Reserve also monitor valuation trends.,¹