Is the Comparator Selected Appropriately in the Valuation through PSR?

Applying the price sales ratio (PSR) valuation, our case study examines the validity of the relative valuation of the stock of a Korean case company Cafe 24, which reported losses and unrealized profits, but listed its stock on the KOSDAQ market via the Tesla listing channel. We find that the PSR method evaluates the stock prices of the case company, which vary significantly depending on the selection of comparable companies. When selecting foreign companies with different risk-free interest rates and capital market structure from the target company, or domestic comparable companies with a heterogeneous business or sales structure, the price per share of the case study (using the PSR relative valuation) is different from its initial public offering price. Although this study is not yet widely used as a valuation method for unlisted stocks that are expected to have future growth potential, such as platform companies or innovative companies in Korea, we examine the PSR, which is actively used in foreign countries. This study provides financial managers, financial analysts, and researchers with invaluable information on the importance of selecting appropriate comparable companies at the PSR relative valuation for Tesla listing of innovative companies.