Most business markets around the world have a two-tiered structure with a large variance between private and public company P/E ratios. Private company valuations are, however, still influenced by public company sentiment because of a trickle-down effect to the private business sector. Generally speaking, private company valuations do not fluctuate as much as public company ones, except where a private company is about to be listed on the Stock Exchange when very high multiples can be applied to it if it is in a fashionable business sector.
Various bodies publish indices of historic P/E values. For example, you could refer to the EDO Stoy HaywardlThompson Financial Private Company Price Index, which gives year-on-year P/E ratios for larger private companies.
Flotations of Internet-related, and other high-tech companies in the late 1990s were based on values that obeyed few valuation rules. It was not only that P/E ratios were high but also that in many cases they did not even apply, because the businesses had never made a profit! In these cases the only rule of valuation that applied was to capitalise hopes and expectations. Here we must rely on the forecasting powers of City bankers, which are beyond the comprehension of mere business people.
