I thoroughly appreciate the quality of the articles I read here at The Motley Fool, but I'm frustrated by the difficulty I frequently experience in finding a definition for a term with which I'm unfamiliar. I know there's a "Glossary of Financial Terms" at the link to "Fool's School," but wonder why TMF "HOME" page doesn't contain a more readily available/accessible source of definitions for 'Foolish terms', some of which aren't defined in the article or in the Glossary (e.g., the term 'multiple' being one glaring example)? (I do know the term refers to a ratio, usually greater than 1, and is sometimes used to mean price/earnings ratio, or earnings multiple, but neither 'multiple' nor 'earnings multiple' are defined in the Glossary) I'm sure this question has been raised previously, but I couldn't find an answer to it....Many thanks in advance,Ryszard (Polish translation of 'Richard')
Multiple is a pretty basic term. A multiple refers to the price of a company's stock relative to some other measurement like earnings, book value, sales, EBITDA, etc. If A company has a sales multiple of 2x's, this simply means the market cap is two times greater than the Sales for that company. People will refer to multiples when trying to assess a company's value relative to others. Pepsi has a foward P/E multiple of 16x's and Coke has a foward P/E multiple of 21x's. This good mean that Pepsi is trading cheaply compared to Coke or Coke his higher quality earnings that are worth more. Hope this helps.
Mutliples usually are referring to a valuation metric when trying to analyze the relative value of a company.Mulitple is usually just another term for price/earnings ratio (P/E ratio or PE) which measures the value of a company's stock determined by share price divided by earnings per share (EPS). Multiples simply reflect how much investors are willing to pay for a companys stock per every dollar of earnings, sales, EBITDA, etc that is reported.
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