Earnings Multiplier

What is the 'Earnings Multiplier'

The earnings multiplier is 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.

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    Find out how the Federal Reserve uses monetary policy to impact the deposit money multiplier for American banks, including ... Read Answer >>
  3. How can I use the equity multiplier to determine if a stock is a good investment?

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  4. Which is better: A high or low equity multiplier?

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  5. Why is the multiplier effect associated with Keynesian economics?

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