Courses / Valuation Multiples

Valuation Multiples

21 Lessons | 4 Quizzes

In this course, we’re going to take a deep dive into valuation multiples. Valuation multiples are ratios that measure how many times or “turns” investors are willing to pay for every dollar the company earns. They are the corporate finance equivalent of “Price per Square Foot” in real estate. Investors use multiples to evaluate whether the prices for a company are reasonable and to estimate how much the company will be worth in the future. By the end of the course, you’ll understand the common multiples (i.e. EV / EBITDA; P/E), timing considerations (i.e. forward vs. trailing) and their key drivers.

Key Takeaways:

  • Timing consideration
  • Using multiples to project future value
  • Drivers of multiples

Lessons

1. What are Valuation Multiples

4:57

Valuation multiples are ratios that put into perspective what you're paying and what you're getting.

2. Common Valuation Multiples

2:36

The common valuation multiples are EV/UFCF, EV/Revenue, EV/EBITDA, EV/EBIT, Equity Value/LFCF and P/E.

3. What Do We Use Multiples For

4:08

We can use multiples to evaluate whether an investment opportunity is reasonably priced, estimate future valuation and operating metric.

4. When to Use the Different Multiples

5:23

In this lesson, we'll learn when we should use EV/EBIT and EV/Revenue instead of the more commonly used multiples.

5. Numerator and Denominator Consistency

2:30

A meaningful valuation multiple requires both the numerator and the denominator to be logically consistent.

6. Forward Multiples

3:23

Forward Multiples are forward-looking multiples based on how much money the company will make in the future relative to the valuation date.

7. Trailing Multiples

4:47

Trailing Multiples are backward-looking multiples based on how much money the company has earned in the past relative to the valuation date.

8. Forward and Trailing Multiple Timing Considerations

5:07

In this lesson, we'll learn the time consideration surrounding multiples.

9. How to Determine Number of Years Forward

2:45

In this lesson, we'll learn how to pinpoint the amount of time forward or trailing a multiple is relative to the valuation date.

10. Labeling the Multiples

5:35

How do you label multiples like a professional? We'll go over the 3 factors you should always specify to avoid confusion.

11. Using Multiples to Estimate Future Value

5:44

In this lesson, we'll learn how to use valuation multiples to project how much a company and its stock will be worth in the future.

12. Valuation Bridge

3:20

For future valuation in terms of Enterprise Value, Equity Value and Stock Price, once we get a single number, we can derive the other two.

13. Implied Valuation Multiples

2:58

Implied multiples are the other multiples that a company is implied to be worth based on the valuation set by a specific multiple.

14. Drivers of Multiples: FCF Multiples

8:27

What causes the multiple for one company to be 12x while the multiple for another company to be 15x?

15. Math Proof of the Drivers Behind FCF Multiples

12:08

We'll prove the drivers of multiples through some basic high school math.

16. Estimating Multiple without Comps

2:10

You can estimate the multiple a company should trade at without looking at comps. We'll show you how.

17. Drivers of Multiples: Non-FCF Multiples

3:51

We learned the drivers of UFCF and LFCF multiples. What about the drivers of EV/Revenue, EV/EBITDA, EV/EBIT, and P/E?

18. Breaking Down the Drivers of Multiples

3:58

We'll dissect the drivers of multiples and explore some examples of the different factors that can impact these drivers.

19. Why Different Industries Have Different Multiples

2:26

Different industries have different multiples because they differ in attractiveness based on the multiple drivers.

20. Not-Meaningful Multiples

2:09

There are generally 3 situations where the calculated multiples are not meaningful. We should label these not-meaningful multiples as "NM".

21. Connecting Dots

1:52

Now that we understand the anatomy of valuation multiples, let's connect the dots and see how the course is relevant to investment analysis.