Price multiples: What are they and how to use them?

Is the stock priced right? This is a question that has kept investors awake for generations. Over the years, various valuation techniques have emerged, but none simpler than the price multiple approach. Price multiples are primarily used to look at a stock's market price in conjunction with its fundamentals, i.e., earnings, revenue, sales, etc. This allows investors to know if a stock's price is a reflection of its performance or if it's just hype inflating the prices. How to calculate price multiples While there are a plethora of price multiples, the basic principle governing them is the same. You take t

This article was originally published on March 20, 2023.