Valuation Multiple

A commonly used valuation method based on the principle that similar assets should sell for similar prices. A company’s valuation multiple is compared against peers or recent sales of peers to assess reasonability of valuation. Two common ways to determine valuation multiple are:

• Enterprise value divided by earnings before interest and taxes (EV/EBIT).
• Enterprise value divided by earnings before interest, taxes, depreciation and amortization (EV/EBITDA).