The most common multiple used in the valuation of stocks is the P/E multiple. It is used to compare a company’s market value (price) with its earnings. A company with a price or market value that is high compared to its level of earnings has a high P/E multiple.
What is a good EBITDA multiple by industry?
Investors can compare the multiples of various companies and estimate how much they really need to pay to acquire this company. As a practice, it is seen that the lower the value of the EBITDA multiplies by industry, the cheaper is the acquisition cost of the company. Usually, any value below 10 is considered good.
How do you choose valuation multiples?
You can always use the multiple that best fits your story. Thus, if you are trying to sell a company, you will use the multiple which gives you the highest value for your company. If you are buying the same company, you will choose the multiple that yields the lowest value.
What are the 3 valuation metrics?
- Earnings per share (EPS).
- Price to earnings ratio (P/E ratio).
- Book value per share.
- Market to book ratio.