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Math Proof of the Drivers Behind FCF Multiples (12:08)

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

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Y Ogino
4 days ago

Hey team, great course as always.

Just played around with the numbers a little and found that the multiple is highest when WACC~G (which mathematically makes sense) but intuitively it seems that the multiple should be highest when G>>WACC.

Also, when G>WACC and both G>0 and WACC>0 the multiple is negative, which doesn’t seem to make sense.

Any explanation here would be greatly appreciated!

Thanks

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Y
Y Ogino
4 days ago
Reply to  Y Ogino

Never mind – just realized that G>WACC implies growth rate >economy, so WACC~G represents the highest feasible value of G.

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Valuation Multiples

1. What are Valuation Multiples
(4:57)
2. Common Valuation Multiples
(2:36)
3. What Do We Use Multiples For
(4:08)
4. When to Use the Different Multiples
(5:23)
5. Numerator and Denominator Consistency
(2:30)
6. Forward Multiples
(3:23)
7. Trailing Multiples
(4:47)
8. Forward and Trailing Multiple Timing Considerations
(5:07)
9. How to Determine Number of Years Forward
(2:45)
10. Labeling the Multiples
(5:35)
11. Using Multiples to Estimate Future Value
(5:44)
12. Valuation Bridge
(3:20)
13. Implied Valuation Multiples
(2:58)
14. Drivers of Multiples: FCF Multiples
(8:27)
15. Math Proof of the Drivers Behind FCF Multiples
(12:08)
16. Estimating Multiple without Comps
(2:10)
17. Drivers of Multiples: Non-FCF Multiples
(3:51)
18. Breaking Down the Drivers of Multiples
(3:58)
19. Why Different Industries Have Different Multiples
(2:26)
20. Not-Meaningful Multiples
(2:09)
21. Connecting Dots
(1:52)
22. Quiz #1
(3 Q's)
23. Quiz #2
(5 Q's)
24. Quiz #3
(4 Q's)
25. Quiz #4
(5 Q's)
2
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