Forward P/E and Trailing P/E - What are They, and why are They Important?

Equilest

A relative valuation is based on different multipliers to estimate a company's value. One of the multipliers is the profit multiplier. This article will explain what a profit multiplier is, what it is used for, and the difference between Forward P/E and Trailing P/E. The earnings multiplier is the ratio between a share price and earnings per share. A profit multiplier of 10 means it will take an investor 10 years to recoup the investment.

How To Value Your Business Using Business Valuation Calculator Based On Revenue?

Equilest

Earning Value Methods. The earnings multiplier formula adjusts the future profits against cash flow that could be financed at the recent interest rate over the same period. The earning or time-revenue method interprets the stream of revenues over some time and then applies that to a multiplier. The multiplier varies based on the kind of industry or the economic environment.