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Definition of 'Price Multiple'
Any ratio that uses the share price of a company in conjunction with some specific per-share financial metric in order to evaluate a company's financial situation. The share price is typically divided by a chosen per-share metric to form a ratio.
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Investopedia explains 'Price Multiple'
Some common price multiples are the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, and the price-to-sales (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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Learn what the price/earnings ratio really means and how you should use it to value companies.
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If you don't know how to evaluate a company's present performance and its possible future performance, you need to learn how to analyze ratios.
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While the price-to-earnings ratio is commonly used for assessing stock prices, the price/earnings-to-growth ratio offers forecasting advantages that investors need to know.
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