Earnings Multiples

Earnings multiples remain the most commonly used measures of relative value. This chapter begins with a detailed examination of the price-earnings ratio and then moves on to consider variants of the multiple—the PEG ratio and relative PE. It also looks at value multiples, and, in particular, the Enterprise Value to EBITDA multiple in the last part of the chapter. The four-step process described in Chapter 17 is used to look at each of these multiples.