Multiple
A term that 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, because the top metric is usually supposed to be many times larger than the bottom metric.
Calculated as:
Investopedia Says:
For example, the term multiple can be used to show how much investors are willing to pay per dollar of earnings, as computed by the P/E ratio. Suppose you were analyzing a stock with $2 of earnings per share (EPS) that is trading at $20 -- this stock would have a P/E of 10. This means investors are willing to pay a multiple of 10 times the current EPS for the stock. Related Terms:
Earnings
Earnings Per Share - EPS
Forward Price To Earnings - Forward P/E
Forward Price To Earnings - Forward P/E
Metrics
Multiple Compression
Price-Earnings Ratio - P/E Ratio
Price-Earnings Relative
Price/Earnings To Growth - PEG Ratio Price-Earnings Ratio (P/E Ratio)
A valuation ratio of a company's current share price compared to its per-share earnings.
Calculated as:
For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).
EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.
Also sometimes known as "price multiple" or "earnings multiple". Investopedia Says:
In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.
The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.
It is important that investors note an important problem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number. Related Terms:
Earnings
Earnings Multiplier
Earnings Per Share - EPS
Forward Price To Earnings - Forward P/E
Market Value
Multiple
Price-Earnings Relative
Price-To-Book Ratio - P/B Ratio
Price/Earnings to Growth - PEG Ratio
Trailing Price-To-Earnings - Trailing P/E |