Multiples Approach
Categories: Company Valuation
Multiples approach...to investing.
At what multiple of earnings should this stock trade? What multiple of revenues or cash flow? What is its price-to-earnings-to-growth ratio? When you're paying $20 per share for a company with $1 in earnings, what does that mean? Is it a good price? A bad one?
That's the multiples approach. What multiple of what metric you should be paying to purchase a given security.