What is the pure play method?

In finance, the “pure play method” is an approach used to estimate the cost of equity capital of private companies, which involves examining the beta coefficient of other public and single focused companies.

What is a pure play provide an example?

A pure play is an investors’ term for a publicly-traded company that focuses its efforts and resources on only one line of business. For example, Dunkin’ Brands Group (DNKN), which owns the Dunkin’ Donuts coffee shops, and Starbucks (SBUX) represent pretty pure plays in coffee.

What is pure play data?

Key Takeaways. A pure play refers to an investment in a company that is focused on one specific industry or niche. Some investors like pure plays for their ease of analysis and the exposure they offer to particular sectors.

What is equity beta formula?

As per CAPM Model, exp rate of return on stock = risk-free rate + beta (market rate – risk-free rate) Therefore, beta = (exp rate of return on stock – risk-free rate)/(market rate–risk-free rate) So, the calculation of beta is as follows – Hence Beta = (7%-2%)/ (8%-2%) = 0.833.

Is Netflix pure play?

Netflix. Netflix(NASDAQ:NFLX) is perhaps the most successful pure play stock in the stock market today.

What are pure play retailers?

For pure play retailers, or brands that started out solely in the ecommerce space, brick-and-mortar retail is now an enticing proposition. By Nikki Gilliland March 4th 2019. For pure play retailers, or brands that started out solely in the ecommerce space, brick-and-mortar retail is now an enticing proposition.

Is Netflix pure-play?

What is pure-play marketplace?

When a pure player buys inventory, they are acting just like an e-retailer except, in most cases, without the offline presence. The classic examples are Amazon in the west and Alibaba in the east.

What is beta and alpha?

Alpha measures the return of an asset compared to the underlying benchmark index. Hence, while beta is a measure of systematic risk and volatility, alpha is a measure of excess return.

Pure play method is an approach used to estimate beta coefficient of a company whose stock is not publicly traded. It involves finding beta coefficient of a pure play, a public listed company having single business focus; unlevering it and then relevering it at the first company’s capital structure to find the beta coefficient.

How to calculate the beta of a pure-play method?

Algorithm of the pure-play method: 1 Select comparable companies listed on the stock exchange. 2 Estimate beta for comparable companies. 3 Unlever the beta from step 2 by removing the effect of financial leverage. 4 Lever the beta by adjusting the asset beta to the financial risk of the company for which you want to calculate the beta.

What is the pure-play method for investing in non-listed companies?

In the case of non-listed companies, you can use the so-called pure-play method. In short, this method involves using the beta of a comparable publicly traded company and adjusting the beta so that it takes into account the financial risk of a non-listed company.

What is a pure play stock?

A: A pure play is a company that invests its resources in only one line of business. As such, this type of stock has a performance that correlates highly to the performance of the stock’s particular industry. For example, many electronic retailers or “e-tailers” are pure plays. All they do is sell one particular type of product over the internet.