Earnings Multiplier


DEFINITION of 'Earnings Multiplier'

An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used to discount future earnings, and allows investors to compare expected growth to an amount of money invested over the same period at current rates.

BREAKING DOWN 'Earnings Multiplier'

The earnings multiplier is similar to a discounted cash flow in that future earnings are rolled back to determine how much they are worth in today's dollars. Investors use the earnings multiplier to figure out how much a company is worth, today, based on how it is expected to grow in the future.

  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  2. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  3. Earnings

    The amount of profit that a company produces during a specific ...
  4. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...
  5. Discounted Cash Flow (DCF)

    Discounted cash flow (DCF) is a valuation method used to estimate ...
  6. Middle Market

    Definition of middle market
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