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. Price-Earnings Ratio - P/E Ratio

    A valuation ratio of a company's current share price compared ...
  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. 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. Markets

    Understanding The P/E Ratio

    Learn what the price/earnings ratio really means and how you should use it to value companies.
  2. Trading Strategies

    What are the best technical indicators to complement the Time Segmented Volume (TSV)?

    Understand the function of the Time Segmented Volume, or TSV, indicator, and learn good technical indicators to use in conjunction with it.
  3. Fundamental Analysis

    What is considered a good PEG (price to earnings growth) ratio?

    Learn about the price/earnings to growth (PEG) ratio and understand what investors and market analysts consider a good ratio for this valuation measure.
  4. Fundamental Analysis

    What metrics can be used to evaluate companies in the forest products sector?

    Understand some of the best financial and equity valuation measurements that can be utilized to evaluate companies in the forest products sector.
  5. Fundamental Analysis

    Equity Multiplier

    The equity multiplier is a straightforward ratio used to measure a company’s financial leverage. The ratio is calculated by dividing total assets by total equity.
  6. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  7. Charts & Patterns

    Why is the Relative Vigor Index (RVI) important for traders and analysts?

    Discover why traders and analysts use the Relative Vigor Index, or RVI, to measure the momentum of bull and bear movements in an asset's price.
  8. Technical Indicators

    What are the best technical indicators to complement the Positive Volume Index (PVI)?

    Discover several of the best technical indicators that traders and market analysts use in conjunction with the Positive Volume Index, or PVI.
  9. Fundamental Analysis

    Do you always have to consider intrinsic value when purchasing a stock? Why or why not?

    Take a deeper look at why value investors consider a stock's intrinsic value an important consideration before picking a company to invest in.
  10. Bonds & Fixed Income

    What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond investments.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center