Multiples valuation: Difference between revisions

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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).
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.
The most widely used financial measure for this purpose for a mature business is accounting earnings.
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== See also ==
== See also ==
* [[Correction]]
* [[Earnings]]
* [[Earnings]]
* [[Earnings multiples]]
* [[EBITDA multiple]]
* [[Price to earnings ratio]]
* [[Price to earnings ratio]]
* [[EBITDA multiple]]
* [[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.


See also