Multiples valuation
ValuationDefinition
Valuing a company by applying a multiple (P/E, EV/EBITDA, P/S, etc.) observed on comparable companies. Faster than DCF but inherits whatever distortions the comp set has. Used in 90%+ of M&A deal pricing and fairness opinions.
Common pitfalls: bad comp selection (cyclical co's priced on peak earnings), survivorship bias (failed peers excluded), over-reliance on consensus estimates (especially for Fwd P/E in volatile sectors).
Common pitfalls: bad comp selection (cyclical co's priced on peak earnings), survivorship bias (failed peers excluded), over-reliance on consensus estimates (especially for Fwd P/E in volatile sectors).
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