What is a 'Price Multiple'
A price multiple is any ratio that uses the share price of a company in conjunction with some specific pershare financial metric in order to evaluate a company's financial situation. The share price is typically divided by a chosen pershare metric to form a ratio.
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BREAKING DOWN 'Price Multiple'
Some common price multiples are the pricetoearnings (P/E) ratio, the pricetobook (P/B) ratio, and the pricetosales (P/S) ratio. These ratios are used in conjunction with other fundamental metrics, such as EBIDTA, in order to give analysts and investors a quick initial impression of whether a company would make a good viable investment. However, because these multiples are very simplistic, they should not be the only measure of assessing a potential investment.
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