By | 2017-09-13T15:07:35+00:00 13th September 2017|

A multiple measures some aspect of a company’s financial well-being, 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 price-to-earnings (P/E) ratio. Assume you are analyzing a stock with CZK 2 of earnings per share (EPS) that is trading at CZK 20. This stock has a P/E ratio of 10. This means investors are willing to pay a multiple of 10 times the current EPS for the stock.