What are Mutiples in Corporate Valuations ?
The Multiples are a quick method used in Corporate Valuation. We can also call them Valuation Multiples and they are ratios used to evaluate the valuation of the company. The basic assumption in Multiples is that higher multiples indicate higher valuation and lower multiples indicate lower valuation. Below are the different kinds of Multiples that can be used on case to case basis : 1. Earning Mutiples : The company's earnings are a fundamental driver of its long-term value. They are most commonly used for company valuation comparing share price to the earnings. Let's see the examples of Earning Multiples : A. P/E Ratio : The formula is: Share Price divided by Earning per share It is also called equity multiples and is used to determine how high or low the price is paid per share as compared to how much is earned per share. Whereas P/E is a measure of expected earnings, how we can compare peer companies with each other through P/E? In Market Comparable val...