Analytics - 2021


Extraordinary 2020

Fear, uncertainty, optimism and euphoria are the four keywords that characterize last year.

At the beginning of 2020, there was a great deal of fear and uncertainty in the world about the spread of COVID-19. This led to the shutdown of large factories and stoppages in the supply of goods. Various restrictions and travel bans meant a sharp decline in foreign travel for Estonian residents. According to Statistics Estonia, 67% less foreign trips were made in 2020 than in 2019. Abstaining travel meant savings of around € 1 billion, which were redirected into domestic consumption.

The hopes for rapid vaccine development and support programs launched by central banks sparked optimism in the financial markets. Already in the autumn of last year, you could see the stock exchanges recovering from the spring low points, and the rapid growth of share prices continued in 2021 as well. Various European and American indexes reached their new highs. For example, the STOXX 500 has grown by 51% from March 2020 to today, while the S&P500 has grown by 79.7% over the same period. The rapid rise in stock prices also characterizes the Baltic markets – the OMX Baltic Benchmark general index has grown by 90% during this period.

The recovery of the Estonian economy was faster than initially predicted, but that didn’t happen evenly in all sectors. Due to the restrictions, tourism and the entertainment sector continue to be hit. In 2020, Eesti Pank forecasted that the economic downturn could be greater than 6% due to the effects of COVID-19. The reality was slightly better, and according to Statistics Estonia, Estonia's gross domestic product decreased by 2.9% in 2020. At the beginning of 2021, Eesti Pank forecast economic growth of 2.9% in 2021, but in September forecast, 9.5% growth is already expected for the year.

Due to the effects of the coronavirus, Estonia's GDP decreased by 2.9% in 2020. How is it possible then that, compared to 2020, the total value of the TOP 101 Estonia’s most valuable Enterprises has risen sharply? The valuation of companies is based on companies’ 2020 financial results, but we take the stock market multipliers as of the 30th of June 2021. The increase in the total value of the TOP 101 compared to the previous year therefore gives a signal that Estonian companies have mostly managed to come out of the crisis and the economy as a whole has exceeded the pre-crisis level.

There have been no major changes in the division of sectors compared to the previous year. The share of the real estate sector has decreased and that of the financial sector companies has increased. To some extent, the growth of financial sector companies is due to the general recovery of the markets compared to the summer of the previous year, but updated valuation methodology also plays a role. Namely, we supplemented the methodology so that the value of the bank depends not only on the book value of equity but also on its productivity or ROE. In addition, we narrowed the peer group companies by their geographical area. Previously, we derived the TOP 101 banks multipliers from the European stock exchange banks’ P/B ratios. Now we narrowed the peer group geographically to only Northern-European and Baltic banks.

A very good indicator when analyzing the TOP 101 ranking is the value of the 101st company. If in 2020 the value of the 101st company was € 59 million, then in 2021 the TOP threshold was already at 87 million euros. This shows that the increase in the total value of the top is not only due to the increase in the value of few larger companies, but the economy as a whole is in a growth phase.