Multiples valuation: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Add link.) |
imported>Doug Williamson (Links ordering.) |
||
| (2 intermediate revisions by the same user not shown) | |||
| Line 25: | Line 25: | ||
* [[Correction]] | * [[Correction]] | ||
* [[Earnings]] | * [[Earnings]] | ||
* [[Earnings multiples]] | |||
* [[EBITDA multiple]] | |||
* [[Price to earnings ratio]] | * [[Price to earnings ratio]] | ||
* [[Shareholder value]] | * [[Shareholder value]] | ||
* [[Value driver]] | * [[Value driver]] | ||
[[Category:The_business_context]] | |||
[[Category:Corporate_finance]] | |||
[[Category:Investment]] | |||
[[Category:Financial_products_and_markets]] | |||
Latest revision as of 23:30, 30 December 2020
A method of business valuation which is based on:
(i) a relevant measure; and
(ii) the ratio of value to that measure for a comparable business (or a comparable group of businesses).
The most widely used financial measure for this purpose for a mature business is accounting earnings.
For other types of businesses, relevant measures might include - for example - turnover, or numbers of subscribers.
In simple terms, a lower multiple would indicate one or more of:
- weaker future growth prospects
- higher risk
- lower asset quality
- poorer management
- possible undervaluation
Higher multiples would suggest better growth propsects, lower risk, better asset quality, better management or possible overvaluation.
