How to value a company using multiples - MoneyWeek Investment Tutorials

For investors wanting to do a quick and dirty check on whether a firm is cheap or expensive, multiples can be helpful. As part of his short series on valuing companies, Tim Bennett explains why and how to go about using them.

[rossthegreatess]

Anyone on here in college, thinking.... I'm learning all of this for free. Thank Tim again!

[rentownnz]

Hey Tim, Just wanted to say thank you! I know this is an old video, however I think this is well articulated and interesting enough to stick with it.
I Prefer to do DCF Intrinsic valuations, however this is impossible to do with a new company that is in its growth phase and pouring all its earnings + more into growth, development, sales marketing and more. Using P/E Sector Comps with PEG and Price to Sales Ratios is a good way to at least see what the rest of the sector is getting paid on a share price basis and you will see if this comparable to the company you are researching. I always look at this and the asset base net growth year on year to see if the company is heading In the right direction or simply burning cash hidden inside a sales Trojan Horse!!
Thanks again for your time to make these videos.

[siddsy]

Wow. Fantastic video.
Beautifully explained...w
hen to use P/E, when to use P/S and when to use P/B.

Most places I've read vague explanations like...compare P/E to peers, or compare to benchmark.
First time I've actually seen an explanation on how to use it to value against Market Cap. Many thanks!

[jimb]

would be nice if tim actually showed his work using the financials of an actual company to do these tutorials. thats practical teaching! Application then becomes easier

[TheMunishk]

Were you always good? It's joy to watch your videos specially when you explain in clear and simple manner.

[jamesriddle]

Using multiples is a great starting point for determining the timing of the sale. If the approximate selling price is within the seller's acceptable amount, it's time to start the process. Sellers can get maximum profits for the sale of their business if they create a competitive environment when buyers compete against each other for the purchase. The value of the business is ultimately determined by the amount a willing and informed buyer will pay for the business. Creating a competitive environment, causes the buyers to reach deeper into their pockets for fear of loss. The seller will get better terms as well in a competitive environment.

[GurlNextDoor]

The nose picking at 6:24 tells me I can trust this man, he has nothing to hide.

[jorgesa]

Hello, can't we use growth in this method?

[pat]

Sir can you please explain this when you said let's say if the value of the company is 300M. How we would know that because you back-calculated the price from PE? pardon me if I am wrong. Thanks

[karanbajaj]

does these formulas are used for forecasting ? and valuing future sales or earning ? please share your thoughts

[jasondavis]

can I ask if you have any other video that expands more on when to choose the right multiple?

[Economy]

Absolutely fantastic ! I watch 5 of your lessons in a row !!!

[daniellobe]

Hi,
Please what are suitable techniques for the valuation of banks?
Thanks

[preetichaudhary]

Great video Tim. I didn't get the comparison in the end. I will appreciate if you could explain that comparison of 500 Million with 300 Million.

[ranjitmenon]

QUEST :Earning based ratio company's, the sales has to be minus with Expenditures to get the actual valuation of the company or its done directly based on sales turnover ? I request you to answer this question please... R. B. M

[patrickjohnson]

Thank you for sharing this information. I like your delivery. You make it easy to understand.

[madhavsharma]

But p\e ratio is used to determine the valuation i.e whether it is overvalued or undervalued. Then how will it be used to determine the cost of a business while selling it and how come earning per shares multiplied would give the cost of business?

[davidm]

should the pound sign have a double dash?

[CommandoX]

This is a somewhat convoluted way of saying simply to compare P/E ratios between a company and its sector.

[fatemeazizi]

Why do businesses use the Multiples Method?