Earnings Growth Rate Estimates over Five Years Company Earnings Growth Rate Estimate (%) Adesivo 16.67 Enviado 21.91 Gesticular 32.33 Pinho asks Silveira about the possible use of the price- to- sales ratio (P/S) in assessing the relative value of the three companies. Silveira tells Pinho: Statement 1 The P/S is not affected by revenue recognition practices. Statement 2 The P/S is less subject to distortion from expense accounting than is the P/E. Pinho asks Silveira about using the Fed and Yardeni models to assess the value of the equity market. Silveira states: Statement 3 The Fed model concludes that the market is undervalued when the markets current earnings yield is greater than the 10- year Treasury bond yield. Statement 4 The Yardeni model includes the consensus five- year earnings growth rate forecast for the market index. Silveira also analyzes the three companies using the enterprising value (EV)-toEBITDA multiple. Silveira notes that the EBITDA for Gesticular for the most recent year is R$560 million and gathers other selected information on Gesticular, which is presented in Exhibit 4. Exhibit 4 Selected Information on Gesticular at Year- End (R$ millions) Market Value of Debt Market Value of Common Equity Market Value of Preferred Equity Cash Short- Term Investments 1,733 6,766 275 581 495 Pinho asks Silveira about the use of momentum indicators in assessing the shares of the three companies. Silveira states: Statement 5 Relative- strength indicators compare an equitys performance during a period with the performance of some group of equities or its own past performance. Statement 6 In the calculation of standardized unexpected earnings (SUE), the magnitude of unexpected earnings is typically scaled by the standard deviation of analysts earnings forecasts