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Valuation Using Multiples—What Is It and How Does It Work? Core Ideas Explained

Valutico

The ratio used might be EV/EBITDA, EV/Sales, P/E or another, depending on the valuation performed and the type of business being valued. The ratio is then used in a simple multiplication calculation, to determine the value of the company in question. Broadly, there are two different common ways to value using multiples. .

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Your Guide to Valuing a Company Using the Multiples Approach

Valutico

The ratio used might be EV/EBITDA, EV/Sales, P/E or another, depending on the valuation performed and the type of business being valued. The ratio is then used in a simple multiplication calculation, to determine the value of the company in question. Broadly, there are two different common ways to value using multiples. .

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Company Valuation Methods—Complete List and Guide

Valutico

This method is common in industries where valuations are commonly expressed as a multiple of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) or Earnings Before Interest and Taxes (EBIT). iv) Dividend Discount Model (DDM) Focuses specifically on valuing companies that pay dividends to their shareholders.

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Discounted-Cash-Flow-Analysis: Your Complete Guide with Examples

Valutico

Practitioners assume the business is sold as a multiple of some financial metric like EBITDA, based on what they can see today for other businesses that were sold, and what these comparable trading multiples are. . Discount the Terminal Value. . Add up all the figures you have to arrive at the Net Present Value. Depreciation.

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Earnings and Cash Flows: A Primer on Free Cash Flow

Musings on Markets

In the last two decades, I have seen free cash flow measures stretched to cover adjusted EBITDA, where stock-based compensation is added back to EBITDA, and with WeWork, to community-adjusted EBITDA, where almost all expenses get added back to get to the adjusted value.