Bizval Indicator Report
for March 2025
We like to think of the Bizval Indicator as a ‘barometer’ of SME valuation multiples providing a perspective of the value of New Zealand small-to-medium sized businesses.
Unlike listed companies, the sale prices of SME’s are not readily available. The Bizval Indicator helps monitor movements in the drivers of SME values.
The Bizval Indicator is derived from key drivers of SME values and is then reviewed in the context of a basket of general economic indicators.
Bizval Indicator
| NOW | LAST YEAR | MOVEMENT |
|---|---|---|
| 386 | 354 | 8.9% |
Source: Bizval, 31 March 2025.
Bizval Indicator records a positive result in March 2025
The Bizval Indicator continues its trend into positive territory with an indicator of 386 recorded in March 2025, up from 354 a year ago representing an increase of 8.9%.
As we alluded to last quarter, while the latest indicator is surprising on face value, it’s worth noting that it is coming from a very low base. The Bizval Indicators of December 2023 (347), March 2024 (354) and June 2024 (350) were the three lowest levels recorded since we commenced the indicator in 2020.
The Price Earnings (P/E) ratios of small NZX companies were once again the most significant influence on the Bizval Indicator this quarter. These P/E ratios have grown by over 26.0% over the past 12 months.
At Bizval we continue to value businesses from a wide range of industries with Construction, Professional Services and Retail featuring prominently this quarter.
General Economic Indicators
| INDICATOR | NOW | 1 YEAR AGO | MOVEMENT |
|---|---|---|---|
| NZX 50 NZ (1) | 12,246 | 12,105 | 1.16% |
| RBNZ Official Cash Rate NZ (2) | 3.75% | 5.50% | -1.75% |
| GDP NZ (3) | -0.50% | 0.60% | -1.10% |
| Dow Jones Industrial Average USA (4) | 42,002 | 39,807 | 5.51% |
| Inflation (CPI) NZ (5) | 2.20% | 4.70% | -2.50% |
| Unemployment Rate NZ (6) | 5.10% | 4.00% | 1.10% |
(1) Source: NZ Stock Exchange, 31 March 2025
(2) Source: Reserve Bank of New Zealand, 19 February 2025
(3) Source: Stats NZ, 31 December 2024
(4) Source: New York Stock Exchange, 31 March 2025
(5) Source: Stats NZ, 31 December 2024
(6) Source: Stats NZ, 31 December 2024
Official Cash Rate
On Wednesday 19 February the RBNZ Committee reached a consensus to lower the Official Cash Rate by 50 basis points to 3.75%.
With headline CPI inflation close to the midpoint, measures of core inflation converging on the midpoint, stable business inflation expectations, and significant spare capacity in the economy, the Committee agreed that a further reduction in the OCR was appropriate.
The Committee agreed that a 50-basis point reduction would be consistent with their mandate of maintaining low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates and the exchange rate.
If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025. (Source: RBNZ)
Inflation
New Zealand’s Consumer Price Index (CPI) increased 2.2% in the December 2024 quarter, compared with the December 2023 quarter, according to figures released by Stats NZ.
The 2.2% annual increase follows an identical 2.2% annual increase in the September 2024 quarter.
“This is the second consecutive quarter that the annual inflation rate has been within the Reserve Bank of New Zealand’s target band of 1 to 3 percent,” prices and deflators spokesperson Nicola Growden said.
Between the June 2021 and June 2024 quarters annual inflation was above the target band.
“Prices are still rising, but not as much as previously recorded. The most recent peak was in the June 2022 quarter when the annual inflation rate reached 7.3%” Growden said. (Source: StatsNZ)
Drivers of SME Values
The Bizval Indicator is calculated using a proprietary formula. We research, monitor and evaluate the following components to arrive at the result.
NZX Small Cap P/E Ratios
Small Capitalisation companies have greater similarities to private SMEs than large cap stocks. Bizval reviews the mean and median price earnings (P/E) ratios of companies with market capitalization of between $20 million and $200 million. We adjust these figures to align them more closely with private SMEs by reducing the P/E ratios to account for differences in size, key-person dependence and ability to easily buy or sell (liquidity).
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Business Loan Interest Rates
Bizval monitors the advertised interest rates of New Zealand major banks for business loans. Using an average of these rates we then add a risk margin (commonly added to the base rate by banks when lending to small businesses). We also add a hypothetical margin for the SME proprietor to reflect their return on investment. This interest rate is then converted to a multiple.
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Businesses for Sale
Bizval undertakes a review of the volume of businesses listed for sale across New Zealand, taking into account any movements in this number.
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Bizval Multiples
We review an average of the multiples used in our business valuations and combine these with multiples from actual business sales (where available).
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In addition to the four drivers of SME values, the Bizval Indicator is evaluated in the context of six national / international General Economic Indicators.
The NZX 50 Index (New Zealand Stock Exchange)
The NZX 50 Index (NZ50) is the primary stock market index in New Zealand. It comprises the 50 biggest stocks by free-float market capitalisation trading on the New Zealand Stock Market (NZSX).
Reserve Bank of New Zealand Official Cash Rate
The RBNZ sets the target ‘cash rate’, which is the market interest rate on overnight funds. It uses this as the instrument for monetary policy and influences the cash rate through its financial market operations.
Gross Domestic Product (New Zealand)
GDP is a monetary measure of the market value of all final goods and services produced over a defined period of time.
Dow Jones Industrial Average (USA)
The ‘Dow’ is a US stock market price-weighted index monitoring the share trading performance of 30 large, publicly owned American-based companies.
Inflation Rate (New Zealand)
The Consumer Price Index (CPI) measures the average change over time in the prices paid by New Zealand households for a fixed basket of goods and services.
Unemployment Rate (New Zealand)
This indicator is the official unemployment rate for New Zealand. The unemployment rate reflects conditions of the labour market and economy overall. It gives a sense of the number of people seeking work.
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