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  • Types of Multiples - Comparison

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    Rohan Barnwal
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    This document discusses popular multiples used to value companies, including price-to-earnings ratio, enterprise value to EBITDA, enterprise value to sales, and sector-specific multiples. It explains that the price-to-earnings and enterprise value to EBITDA multiples are the most popular as they are easy to apply and consider profitability, but they can be influenced by one-time events and capital structure respectively. Enterprise value to sales is applicable in all situations but does not consider profitability. Sector-specific multiples are good proxies for future potential within an industry but do not reflect profitability.

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    This document discusses popular multiples used to value companies, including price-to-earnings ratio, enterprise value to EBITDA, enterprise value to sales, and sector-specific multiples. It explains that the price-to-earnings and enterprise value to EBITDA multiples are the most popular as they are easy to apply and consider profitability, but they can be influenced by one-time events and capital structure respectively. Enterprise value to sales is applicable in all situations but does not consider profitability. Sector-specific multiples are good proxies for future potential within an industry but do not reflect profitability.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    2 views2 pages

    Types of Multiples - Comparison

    Uploaded by

    Rohan Barnwal
    This document discusses popular multiples used to value companies, including price-to-earnings ratio, enterprise value to EBITDA, enterprise value to sales, and sector-specific multiples. It explains that the price-to-earnings and enterprise value to EBITDA multiples are the most popular as they are easy to apply and consider profitability, but they can be influenced by one-time events and capital structure respectively. Enterprise value to sales is applicable in all situations but does not consider profitability. Sector-specific multiples are good proxies for future potential within an industry but do not reflect profitability.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    The Complete Investment Banking Course

    Company Valuation - Multiples


    Popular Multiples
    Examples of multiples used by practitioners

    Multiple Why use it? Why not? Popularity

    • Easy to apply • Depends on capital


    structure
    Price / Earnings Very popular
    • Represents shareholders’ • Easily influenced by one-
    point of view off events

    • Considers profitability
    • Does not consider items
    EV / EBITDA that are below EBITDA Very popular
    • Not influenced by capital
    structure

    • Can be applied in all situations • Does not consider Narrow


    EV / Sales Application
    (revenues cannot be negative) profitability

    • Good proxy for future


    Sector Specific
    potential • Does not consider Narrow
    (number of users,
    profitability Application
    MW installed, etc.) • Comparable across the
    entire industry

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