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

Valutico

Example: Here’s an example of a particular metric you might use: In order to determine the Enterprise Value of the business, you find the EBITDA from the business you’re valuing, and then multiply this by the EBITDA multiple observed from the other comparable companies. This EBITDA multiple is the EV/EBITDA ratio.

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Your Guide to Valuing a Company Using the Multiples Approach

Valutico

Example: Here’s an example of a particular metric you might use: In order to determine the Enterprise Value of the business, you find the EBITDA from the business you’re valuing, and then multiply this by the EBITDA multiple observed from the other comparable companies. This EBITDA multiple is the EV/EBITDA ratio.

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Earnings and Cash Flows: A Primer on Free Cash Flow

Musings on Markets

With enterprise value multiples, you can scale enterprise value to FCFF, instead of using EBITDA or revenues as your scalar.