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Multiple
Definition
The multiple is simply a metric that an investor may utilize to compare companies in the same industry or to express how much they are paying for the earnings of that company.
Using the term Multiple :
In the public and private markets, an investor may often utilize a multiple in order to determine if the investment is cheap or expensive in comparison with similar companies or the broad market.
Pay Special Attention To :
Multiples can be misleading because earnings themselves may be misleading. While the price being paid is a certainty, as we have discussed in the past in reference to earnings manipulation , management may manipulate earnings and distort reality. Therefore, you may not have a true comparison. Knowing management and understanding accounting tricks is very important.
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Related terms
Price to Earnings Ratio , Earnings Manipulation
