valuation
A valuation multiple is a ratio that expresses price (enterprise or equity) per unit of a value driver such as EBITDA, revenue or earnings. One well-chosen multiple compresses a peer or deal observation into a pricing factor you can apply to the target.
A valuation multiple is simply:
Multiple = value measure / value driver
The entire craft is matching. If the numerator is enterprise value, the denominator must be a claim belonging to all capital providers (revenue, EBITDA, EBIT, FCFF). If the numerator is equity value, the denominator must be an equity residual (net income, FCFE, book equity). Mix them and the ratio is noise.
The second match is time: last twelve months (LTM), next twelve months (NTM), or a cycle-average driver. A "cheap" LTM multiple on peak earnings is not cheap.
Algebraically, an EV/EBITDA multiple is a compressed DCF. Holding payout and risk fixed, higher growth and higher margins justify a higher multiple; higher WACC justifies a lower one. Damodaran's relative-valuation chapters make that explicit so the multiple is not a superstition.
One multiple is a tool, not a conclusion. Serious work uses a set of valuation multiples and asks whether they tell the same story.
Peg & Channel Ltd is invented, illustration only. EV €57.8m; LTM EBITDA €6.8m; LTM revenue €42.0m; net income €3.1m; equity value €48.6m.
| Multiple | Arithmetic | Use |
|---|---|---|
| EV / EBITDA | 57.8 / 6.8 = 8.5x | Core operating comparison |
| EV / Revenue | 57.8 / 42.0 = 1.38x | Cross-check if margins differ |
| P / E | 48.6 / 3.1 = 15.7x | Equity view; leverage-sensitive |
Apply 8.5x to a different company with €5.0m of genuinely comparable EBITDA and you imply EV of €42.5m—only if growth, margin, reinvestment and risk actually match.
Process letters and teasers lead with one number ("c. 9x EBITDA") because committees can remember it. The diligence fight is whether the driver is clean and whether the peer that produced 9x is a peer. Comparable companies supply trading observations; deals supply control observations. Neither is "the" multiple without the matching work above.
A single multiple cannot capture working-capital intensity, maintenance capex, customer concentration or key-person risk. Those live in the forecast and the due-diligence file. In negative-earning cases the earnings multiple is undefined; the conversation moves to revenue or to a DCF.
Dazur will quote a primary multiple when it is the language of the buyer set—usually EV/EBITDA in cash-generative mid-market, EV/revenue in scaled but unprofitable growth. We always show the matching rule on the same slide. A lone "x" without a defined numerator, denominator and period is not analysis; it is decoration.