Valuation Multiples: Formulas, Examples and Company Comparisons
A multiple prices one company against another by dividing its value by a financial measure — earnings, operating profit, revenue or book value. It is a relative statement, not an intrinsic one: it tells you what the market pays for a unit of profit elsewhere, and asks whether this company deserves more or less.
| Multiple | Formula | What it captures, and where it misleads |
|---|---|---|
| P/E | Share price ÷ earnings per share | Equity value against profit after interest and tax. Distorted by leverage and by one-off items, and meaningless where earnings are negative. |
| EV/EBITDA | Enterprise value ÷ EBITDA | Compares businesses before financing and depreciation policy. Flattering to capital-intensive companies, because the spending that keeps the asset base intact is excluded. |
| EV/EBIT | Enterprise value ÷ operating income | Charges depreciation, so a company that must reinvest heavily looks more expensive than it does on EBITDA. Usually the fairer of the two for asset-heavy businesses. |
| EV/Revenue | Enterprise value ÷ revenue | Works where profit is not yet representative. Says nothing about whether revenue converts to cash, so it is only comparable within similar margin structures. |
| P/B | Share price ÷ book value per share | Anchors on the balance sheet. Informative for banks and insurers where assets are marked, weak where value is intangible and unrecorded. |
Enterprise multiples and equity multiples
Enterprise value covers everyone who funded the business — equity and debt, less excess cash — so it pairs with measures taken before interest: EBITDA, EBIT, revenue. Equity value covers shareholders alone, so it pairs with earnings after interest. Putting an equity numerator over a pre-interest denominator, or the reverse, compares two different claims and produces a number that means nothing.
Trailing and forward
A trailing multiple uses reported results: verifiable, and possibly stale. A forward multiple uses estimates: current, and only as good as the estimate. Never mix them inside one comparison — a trailing multiple on one company against a forward multiple on another usually flatters whichever is growing.
Peer comparison
The peers below are companies whose filed financials and prices are published on this site. Uncheck one and the median and the implied value update immediately.
Choosing comparable companies
Comparability is about economics, not sector labels. Two companies belong in the same set when they face similar demand drivers, reinvest at similar rates, earn similar margins and carry similar risk. A sector screen produces peers that share a code and nothing else.
Why a low multiple is not automatically cheap
A multiple is the output of growth, margin, reinvestment and risk. Faster growth and higher margins earn a higher multiple; heavy reinvestment to stand still earns a lower one, because less of the profit reaches the owner; higher risk raises the required return and lowers what any given profit is worth. A company trading below its peers is usually being marked for one of those reasons. The work is to establish which, and whether the market has it right.
When multiples and a DCF disagree
A DCF says what the cash flows are worth on your assumptions. Multiples say what the market pays for similar cash flows elsewhere. When they diverge, either your assumptions differ from the consensus embedded in the peer set, or the peer set is not comparable. Both are worth knowing, and neither is settled by averaging the two answers. Build the DCF first, then see what the peers imply.
Industry benchmarks
Any benchmark quoted here states its date, geography, sample size and exclusions, and whether it is a median or an aggregate. A median treats every company equally; an aggregate lets the largest company dominate. The two can differ by several turns in the same set, so an unlabelled benchmark is not usable evidence.
What could change this valuation?
Reported developments on the left. The assumption they invite you to re-examine, and the recalculated result, on the right. The size of each change is your judgement.
Policy rates move higher across the curve
Teaching example · Used when no tracked development maps to a valuation assumption.
Cost of capital
Only part of a policy move reaches a company's weighted cost of capital. The pass-through depends on the debt mix, refinancing schedule and equity risk premium, so the size below is your judgement, not an arithmetic consequence.
Long-run growth expectations are revised down
Teaching example · Used when no tracked development maps to a valuation assumption.
Terminal growth
Terminal growth should stay at or below long-run nominal economic growth. Small revisions here move most of the value because the terminal period carries most of it.
Input costs rise and are not passed to customers
Teaching example · Used when no tracked development maps to a valuation assumption.
Forecast free cash flow
Margin pressure shows up in the forecast period rather than the discount rate. Check whether the company has repriced before assuming it cannot.
Capital spending steps up ahead of revenue
Teaching example · Used when no tracked development maps to a valuation assumption.
Forecast free cash flow
Spending ahead of revenue lowers near-term free cash flow without necessarily changing the terminal value. Whether it raises later cash flow is the question worth answering.
Compare a company you actually hold
The equity valuation workspace builds the peer set from filed financials, keeps the comparison next to the intrinsic model, and records why each peer is in or out.
Compare this company against its peers