What is a 'Multiple'
A multiple measures some aspect of a company's financial wellbeing, determined by dividing one metric by another metric. The metric in the numerator is typically larger than the one in the denominator.
For example, a multiple can be used to show how much investors are willing to pay per dollar of earnings, as computed by the pricetoearnings (P/E) ratio. Assume you are analyzing a stock with $2 of earnings per share (EPS), which is trading at $20. This stock has a P/E of 10. This means investors are willing to pay a multiple of 10 times the current EPS for the stock.
This is calculated as:
BREAKING DOWN 'Multiple'
In the world of stock valuation, two major methods are based on cash flow and a multiple of some performance measure, such as the earnings or sales. Valuation based on cash flow (i.e. the discounted cash flow analysis) is considered to be an intrinsic valuation, while valuation based on a multiple is considered to be relative, because the multiple is relative to some performance measure.
Commonly Used Multiples
The most common multiple used in the valuation of stocks is the P/E multiple. It is used to compare a company's market value (price) with its earnings. A company with a price or market value that is high compared to its level of earnings has a high P/E multiple. A company with a low price compared to its level of earnings has a low P/E multiple. A P/E of 5x means a company’s stock is trading at a multiple of five times its earnings. A P/E of 10x means a company is trading at a multiple that is equal to 10 times earnings. A company with a high P/E is considered to be overvalued. Likewise, a company with a low P/E is considered to be undervalued.
Other commonly used multiples include the enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA) multiple, also referred to EV/EBITDA. It is widely considered to be a solid measure cash flow available to a firm and used by many equity analysts. EV to earnings before interest and taxes (EBIT), also referred to as EV/EBIT, is used for less capitalintensive companies, with fewer depreciation and amortization expenses. The EV to sales ratio, also referred to as EV/Sales, is a multiple that companies with negative earnings often use. All multiples act as a single number that analysts can multiply by some financial metric to determine the relative value.

Multiples Approach
The multiples approach is a valuation theory based on the idea ... 
P/E 30 Ratio
P/E 30 ratio means that a company's stock price is trading at ... 
Comparable Company Analysis  CCA
A comparable company analysis (CCA) is a process used to evaluate ... 
Times Revenue Method
The times revenue method is a valuation method used to determine ... 
Value Trap
A value trap is a stock that appears to be cheap because it has ... 
Price to Free Cash Flow
Price to free cash flow is an equity valuation metric used to ...

Investing
What the Enterprise Multiple Tells Value Investors
Learn how the enterprise multiple which looks at company debt and cash levels, in addition to its stock price, can be taken advantage of in value investing. 
Investing
How To Use The P/E Ratio And PEG To Tell A Stock's Future
The P/E ratio is used to calculate stock price valuation. However the PEG ratio includes earnings growth and can provide insight as to whether the P/E valuation is justified. 
Investing
What Lies Ahead for Apple's P/E ratio
Recently, Apple's P/E multiple has come down to levels equal to the S&P 500. What does the future hold for the tech giant's P/E ratio? 
Investing
Can Investors Trust The P/E Ratio?
The P/E ratio is one of the most popular stock market ratios, but it has some serious flaws that investors should know about. 
Investing
Understanding The P/E Ratio
Learn what the price/earnings ratio really means and how you should use it to value companies. 
Investing
Are stocks with low P/E ratios always better?
Is a stock with a lower P/E ratio always a better investment than a stock with a higher one? The short answer is no. The long answer is it depends. 
Investing
Getting On The Right Side Of The P/E Ratio Trend
Buying at the right time is crucial, but how do we know when that is? 
Investing
Equity Valuation In Good Times And Bad
Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value.

How do I calculate the P/E ratio of a company?
The P/E ratio shows whether a company's stock price is overvalued or undervalued and can reveal how a stock's valuation compares ... Read Answer >> 
Can stocks have a negative pricetoearnings ratio?
A stock can have a negative pricetoearnings ratio (P/E). A negative P/E ratio means the company has negative earnings or ... Read Answer >> 
How can the pricetoearnings (P/E) ratio mislead investors?
A low P/E ratio doesn't automatically mean a stock is undervalued, just like a high P/E ratio doesn't necessarily mean it ... Read Answer >> 
What is the difference between forward p/e and trailing p/e?
Understand the difference between the trailing P/E ratio, which is the standard pricetoearnings calculation, and the forward ... Read Answer >>