Earnings Multiplier

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Earnings

    The amount of profit that a company produces during a specific ...
  2. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  3. Price-Earnings Ratio - P/E Ratio

    A valuation ratio of a company's current share price compared ...
  4. Appraised Equity Capital

    The excess of the market value of an asset over its book value. ...
  5. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
  6. Derived Investment Value (DIV)

    A valuation methodology used to calculate the present value of ...
Related Articles
  1. Understanding The P/E Ratio
    Markets

    Understanding The P/E Ratio

  2. What's a P&L Statement?
    Investing Basics

    What's a P&L Statement?

  3. Technical Top-Down Investing: Analyzing ...
    Retirement

    Technical Top-Down Investing: Analyzing ...

  4. How To Analyze Restaurant Stocks
    Investing

    How To Analyze Restaurant Stocks

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center